When risk is a four-letter word, as it is today, CFOs are damned if they take it and damned if they don't. 

But discouraging the right type of risk taking is a fundamental flaw in conventional risk management, according to Rick Funston, a principal with Deloitte and co-author of the recently published book, Surviving and Thriving in Uncertainty: Creating the Risk Intelligent Enterprise.

The trick is distinguishing good risk from bad. "Bad risk is one where there is no chance of reward for your decision -- like a risk that leads to operational failures, product recalls or a lack of integrity in how you operate," Funston said to CFOzone.

Good risk, on the other hand, is seizing an opportunity where you understand the risks, have analyzed them and determined that they can be managed, so there is high likelihood of success, according to Rick Steinberg, chief executive officer of Steinberg Governance Advisors.

But the difference may be apparent only in hindsight. Oh sure, companies that got caught up in the financial crisis went ahead with questionable investments, despite their risk management systems red flagging some things. Management disregarded those warnings because it believed the risk was controllable, and they wanted to stay competitive, said Tom Mulhare, CPA, partner in charge of the Business Risk Consulting Group at Amper, Politziner & Mattia. The whole world knows how that gamble paid off. Now.

Two other major gaffes come to mind for Wayne Rogers of Wayne Rogers & Co, an investment strategy and management firm -- changing the Packard style and changing the Coca-Cola formula.

Theory also offers some guidance. Say your company has $100 million in cash for acquisitions. You decide to buy a company for $10 million in a totally different industry that has promising technologies that you don't understand. The projected present value of the future technologies is $10 million. This obviously would not be a great deal.

Or, say you decide to buy a company for $10 million in your own industry that has some promising technologies you are familiar with. The projected present value of the future technologies is $30 million. This is by far the better use of your resources, explained Michael Bechara, CPA and managing director of Granite Consulting Group, a governance, risk and control consultancy.

In reality, however, situations are decidedly grayer than this. How to proceed? Do your homework, trust your gut, and cross your fingers.

"Nothing is for sure. Understand the risks and know what level of risk you need to take to be competitive, because there is a risk of inaction," Funston said to CFOzone. In fact, he noted, there risk is the very fundamentals of business, i.e., "What you chose to do and what you chose not to do, like deciding not to change your business model, or deciding whether to move ahead of the market to be the first mover to adapt or deciding to be the last to do so."

What's key is whether the risk involved can be managed. Say you want to enter China. To manage the risk there, you could hire a local law firm who knows the laws and regulations, and a marketing firm there to offer guidance about how to position your product or service, explained Steinberg.  Not only can good advisors mitigate risks, but so can sharing the risk -- be it through insurance, a strategic alliance or joint venture, for example.

Of course, there are also institutional hurdles to surmount. "I have a client that says every time there's a new idea the risk anti-bodies come out against it," Funston said. "Directors are worried about compliance," he explained. "Compliance is important, because you have to play by the book, but compliance doesn't give you a competitive advantage."

So surmounting those obstacles is critical. "You need new markets, new products. You have to do the unexpected before it's done to you," Funston added. "To be enterprising, new initiatives involve risk."

Above all, don't be afraid to fail. "Everyone fails," he said. "You learn from failure more than you do success. Before you take a risk, understand what could cause you to fail so you can prevent it."

Truth is, Funston explained, "You will never know all the facts when making a decision." So he says the question becomes, "how often can one make the correct decisions with the least information in the least time?" Granted, that leads to mistakes. But he observed, "More often than not, the mistakes of omission can be greater than those of commission."

To limit mistakes, Rogers advised that ideas be tested on a small scale can before a company commits to a major investment.

Even so, much will still come down to judgment. Yet it will be aided by an ability to gather the necessary information. Sure, that's easier said than done. But as Funston noted, "Boards and executives are paid to make the tough decisions." And remember, he added, in the end "it's better to be roughly right than precisely wrong."