Theranos was once a seemingly unstoppable force in the world of medical technology, but it has since become an example of how quickly high-risk investments can backfire. The company’s rapid rise and fall serves as a cautionary tale for risk professionals looking to invest in potentially high-reward technologies. Let’s take a closer look at what Theranos can teach us about investing in risky technologies.
The Risks Involved with High-Reward Technologies
When it comes to investing in high-risk, high-reward technologies, there are several pitfalls that risk professionals need to be aware of. First and foremost, there is the risk of overestimating the potential of the technology or underestimating its cost to develop. This was certainly true in the case of Theranos, which promised revolutionary blood testing capabilities but ultimately failed to deliver on its promises due to a lack of internal oversight and inadequate regulation.
Risk professionals must also be aware of the potential for fraud with these types of investments. This is especially true when dealing with young companies or those without established track records. In the case of Theranos, founder Elizabeth Holmes was accused of using her charismatic personality and grandiose promises to attract investors without delivering on her promises. By failing to do their due diligence and verify Holmes’s claims, investors were fooled into investing millions into a company that ultimately proved to be nothing more than a scam.
In addition to the risks associated with investment fraud, risk professionals must also consider how new technologies could impact their existing operations. For example, if a technology is disruptive enough, it could put existing businesses out of business or drastically change the way they operate. In this case, risk professionals need to evaluate not only the potential rewards but also the potential risks before committing significant resources to any new technology investment.
Despite its ultimate failure, Theranos provides an important lesson for all risk professionals looking to invest in potentially high-reward technologies: do your due diligence and never underestimate the risks involved. By thoroughly researching new technologies and understanding both their potential rewards and risks before committing resources or making investments, risk professionals can help ensure that their organizations remain safe from costly mistakes down the road. Ultimately, by exercising caution when investing in risky technologies, risk professionals can protect their organizations from taking unnecessary chances that could prove disastrous down the line.
