Written by
Changeboard Team

Published
05 Dec 2013

What risk type are you? Are you a moth to a flame?

05 Dec 2013 • by Changeboard Team

Different risk types

Arguing for the importance of self-awareness, Socrates famously taught that ‘the unexamined life is not worth living’. Arguably, the self-awareness of senior executives and managers determines whether other people’s lives are worth living – and that applies especially to self-awareness about risk type.

The distance between an extreme 'Wary' risk type and their opposite, the 'Adventurous' risk type, in terms of propensity for risk and risk perception makes the proverbial difference between chalk and cheese look like nit picking. While the former recoil from even minor threats and insecurities, the latter will dive headlong into uncertainties of all descriptions in pursuit of excitement and opportunity - not merely subtle differences of outlook then.

It is certainly a challenge for either risk type to even imagine the distance between the poles that they are apart. The same could be said for any pair of opposite poles on the risk type compass, an assessment that places people into one of eight risk types.

Failures of self-awareness in corporate risk

In these circumstances, failures of self-awareness and an appreciation of these critical differences in outlook will threaten group equilibrium and the chances of rational debate and effective decision-making. As colleagues with very different risk dispositions increasingly view each other with frustration and disbelief, they are in danger of slipping towards confrontation and belligerence with potentially long-term impact on working relationships and effectiveness. This is not an unlikely scenario - since risk and the interpretation of risk must always be pivotal to business success, effective management and governance issues, risk decisions will inflame passions. In the boardroom, where personalities are likely to be singular and egos robust, it would be surprising if this were not the case.

Of course, it is easier to recognise the impact of such dynamics with the benefit of hindsight and especially on someone else’s turf. The graveyard of former greats is littered with examples where the balance of risk went seriously awry; the ENRON and RBS stories have become iconic references in the pantheon of corporate governance and mortality. Eastman Kodak might be a nominee for the opposite pole of corporate risk taking. Home truths will always be more challenging to get to grips with.

Managing risk - striking a balanced view

Disposition towards risk is hard-wired and surely has to be the salient driver of evolutionary success. We are among the survivors of our Pleistocene forbears and should be thankful for the success of previous generations in getting the balance right. Continued success and survival in the corporate world depends on doing more of the same. For group policy development and decision-making this presents some critical challenges. A particular kind of strength is required for successful individuals to co-operate rather than compete. To achieve the necessary transparency requires being ready to admit limitations and self-doubts, to hold one’s self accountable, to set aside personal certainties and to be prepared to consider other views, strategies or leadership styles, even if they seem alien. Courage is required for honest and open self-examination; even more so for taking on board the consequences.

Risk has proven to be a subject of labyrinthine complexity and abstraction - that is until you consider it from the personal viewpoint. At that level, self-knowledge is attainable. It’s importantly beneficial too because it has direct implications for one’s outlook and assumptions: the distinction between being sensitive to every difficulty and danger or seeing the same situations in terms of exciting opportunities. That’s the great advantage of the plurality of a team - it can be both.

The key to any team-building is to ensure an appropriate diversity of talent, specialism and outlook. Diversity of disposition towards risk is, at the very least, highly desirable. It embraces the difference between defence and attack, between saving and investing, between threat and challenge, between misfortune and opportunity, between consolidation and expansion, between pessimism and optimism. The best teams can provide all of that with equal passion, and more effectively than any individual. The worst teams see the danger signals too late to change direction, or the start signal too late to catch up.

Transparency is a laudable aim but very difficult to achieve, largely because it depends on mutual trust. The complexity of the alternatives ensures that perceptions based on stereotypes persist as a convenient or necessary shorthand. But the unravelling of human nature accelerates as discipline boundaries are breached or merged. Our understanding of personality and risk, at the leading edge, already provides dramatically improved reference points for team and personal development. Our understanding of strategies that promote self-awareness, awareness of others, communication and the nature and importance of organisational culture has reached new levels of practicality and utility.

Who should you have in your team?

'Risk Type' determines awareness of, and propensity for, risk. In effect, it establishes a persistent bias towards or against risk taking. The redress for this bias is to be found, at the level of the individual, in awareness of one’s risk type and its implication; at the team level it relies on selection and on achieving an effective balance of risk types.

As a brief guide for CEOs (and others):

  • Beware of selecting in your own image – a team of clones is a hazard not a benefit
  • Seek diversity – a team is not a drilled infantry unit, it’s a multi-tasking SAS style operation
  • If no one in your team is challenging for you to get along with, you might suspect there should be
  • Never consider your personal development to be complete – it isn’t
  • Test your ideas to the limit – encourage criticism, actively seek it out, listen and act on it
  • Beware of your best features – they may also hold the seeds for your downfall
  • Be even more aware of your favourite features – for the same reason

What risk type are you?

Spontaneous
Excitable / unpredictable / enthusiastic / impulsive

Like moths to a flame, they are attracted by the idea of spontaneity and risk, but often regret decisions made in haste.

Intense
Ardent / anxious / edgy / passionate

They invest passionately in people and projects, but anticipation of failure can prove a self-fulfilling prophecy.

Wary
Self-disciplined / cautious/ uneasy / conservative

Ultra-sensitive about vulnerability to risk they are zealous about securing the future and seek to control.

Prudent
Detailed / organized/ systematic / conscientious

Their primary concern is to bring order to everything and to eliminate uncertainty.

Deliberate
Analytical / investigative / calm / business-like

Calculated and sure-footed, they test the ground and never go into anything unprepared.

Composed
Cool-headed / self-contained / imperturbable

Strangers to anxiety and oblivious to risk, they keep their heads when others lose theirs.

Adventurous
Uninhibited / fearless / challenging/ venturesome

They will be prepared to try things that no one has ever tried before.

Carefree
Easy-going / excitement seeking / unconventional/ impetuous

They relish the on-the-fly decision making required in fast moving situations.