People, risk and organisations

Written by
Changeboard Team

12 Aug 2010

12 Aug 2010 • by Changeboard Team

A kitchen knife - a useful tool or deadly weapon?

All human endeavours have their associated risks and, of course, much of the risk exposure of an organisation is inherent in the enterprise they are engaged in. But the discussion about risk seems exclusively focused on these structural and procedural factors - about management and actuarial issues, about health and safety, operational risk, compliance and governance rather than about the personalities of the individuals involved and their contribution to the risk equation.

Put simply, a gun, kitchen knife, baseball bat or even a sharpened stick all have risk implications. Yet the risk exposure associated with these objects depends critically on whose hands they are in. This seems such an obvious comment, but even in the aftermath of near global economic melt down resulting from risk mismanagement, it isnt a comment that is acted on with any conviction.

Of course there is a desire to solve the problem of risk, but current feelings about risk run high and the human capital end of this debate is evidenced more in blame and recrimination than in reasoned analysis.

People are unpredictable

As the newspaper headlines remind us on a very regular basis, people can be highly unpredictable. An individual's risk tolerance their willingness or ability to take on risk is deeply rooted in their temperament and is one of the things that distinguishes each of us from our peers. Our individual approach to risk can be the secret of our success or the catalyst for our (and possibly our employer's) downfall, and it can happen either way.

Ultimately, organisations need risk takers as much as they need prudent rule followers. But how can they best distinguish between them?

The problem for employers is that we too frequently judge people at face value and make informal judgements about a persons capacity for managing risk that can be very misleading. An apparently risk averse attitude may mask the gung-ho nature that an individual reverts to under pressure. Misperceptions arise because a persons attitudes are near the surface and they change according to experience, current circumstance or climate of opinion. The attitudes to risk expressed by interviewees can therefore be a poor guide to a persons temperament and their actual capacity to handle risk.

What is your risk-type?

Personality profiling is one solution that can better help employers understand an individuals predisposition to managing risk, although this approach is limited by the complexity of profile interpretation and the need for employers to identify the issues that are and are not relevant. Research just completed by The Psychological Consultancy addressed this limitation and identifies eight Risk Types that can be measured using an online questionnaire and places each individual on a continuous spectrum of risk types, ranging from wary to adventurous.

Risk type ultimately reflects an individuals underlying personality and remains consistent; when things go pear-shaped, we all revert to type. An understanding of risk type therefore makes it possible to articulate the human factor issues associated with risk. It allows organisations to better understand how individuals will react under pressure and, in a changing and challenging business environment, to deploy them to the best advantage.

It's all about balance

Ultimately, organisations need people that are cautious and people that are adventurous, people that are spontaneous and people who are highly organised and do everything by the book. Disaster happens when organisations get this wrong and dont have the right balance of risk types within their business.