Managing the People Side of Risk
Risk management embraces professionals as diverse as actuaries, civil engineers, bookmakers, auditors, insurance brokers, fore officers, the entire defence industry and much much more. This diversity isn’t surprising because danger is perpetual and inescapable feature of existence. What is surprising is that so little attention has been paid to the people side of risk; the intrinsic dispositions of individuals towards risk. Accidents and disasters can usually be tracked back to a person (compensation lawyers depend on it!), and every individual has their own behavioural risk bias. There are clear and obvious differences in people’s risk disposition; differences that shape their lives. These are amongst our most salient and distinctive features; significant for enjoyment and personal fulfilment as well as for survival and danger management. But how does the human element into the bigger picture? How can we manage the people side of risk?
As the diversity of risk professionals suggests, the risk domain is vast; it reaches into every aspect of life. Any attempt to chart this territory is further complicated by the inherent ambiguity of the term ‘risk’. The focus has usually been on danger and the potential for disaster and, as a result, the word ‘risk’ has become infused with connotations of ‘danger’. Used colloquially, ‘danger’ and ‘risk’ are often treated as synonyms. A further twist in the ambiguity of risk arises because it also has connotations of probability; the idea that something might happen. Add to this the extraordinary variety of events, situations, circumstances where risk is a factor and the challenge in achieving any kind of coherent framework for the topic becomes apparent.
A crucial distinction needs to be made between the amount of attention we pay to the measurement of the risk itself (usually in terms of probability and impact) and the attention we pay to evaluation of the human contribution (as catalysts, moderators, victims or managers).
The Human Factor
The next advance in risk management requires that individual differences in disposition towards risk are taken into account allowing for the people side of risk to be managed. These differences impact on decision making through the perception of risk, reactions to risk, and willingness to take risks. Blanket approaches that treat people en masse will never cover all the bases. Reducing the role of the individual to obedience is problematic, and as times, dangerous. No risk management regime will ever be able to anticipate every eventuality and when the systems break down people need to use their initiative and think for themselves. Over reliance on a regulatory, systems approach inadvertently devalues common sense, discretion and enterprise. Blind obedience is a poor proxy for personal responsibility, An intelligent balance in required between the two. From the Human Factor perspective, risk is very subjective; one person’s danger in another person’s excitement.
Some enjoy uncertainty, others are horrified by it. Some will only do things systematically, others will do things spontaneously. Some people find change alarming, while others find routine alarming. These are all basic differences of personality. We know that the challenges presented by any workplace role will be different for different individuals depending on these and other personality characteristics. Similarly, difference in risk disposition – which are also rooted in personality – will mean that a particular requirement, say for vigilance, or precision, or calmness, or consistency, alertness or caution would present very different challenges to different people and will be reflected in their performance. These individual differences are deeply rooted and will be a persistent and pervasive influence throughout adult life. Although risk dispositions vary across a spectrum defined by personality, individuals can usefully (using the Risk Type Compass psychometric tool) be differentiated into eight Risk Types. These are closely associated with our survival instincts; on the one hand our need to make sense of our world and manage it, and on the other, the need to discover and exploit new opportunities.
These advances in risk personality profiling have significant implications for individuals, for teams and for organisations. They provide a way of getting to grips with managing the people side of risk that is reliable and accessible. Risk Type provides a high utility framework and vocabulary that facilitates communication and strategic risk management. It also extends the risk agenda, enabling it to embrace a more positive style of risk management that takes individual differences, enterprises and opportunity into account.
Learn more about the Risk Type Compass tool in the press here, read our article on cognitive diversity, or contact our Consultant Psychologist, Louisa Bülow, to learn more about how you can manage the people side of risk and build an effective risk culture within your workplace.
The Risk Type Compass personality assessment places individuals into one of eight distinctive Risk Types. By identifying natural differences in risk appetite, you can maximise potential and balance the contributions of risk-takers and more risk-averse individuals.
Media that you may find of interest:
McKinsey & Company: Managing the People Side of Risk
The Association of Business Psychology: Personality and Risk, An Interview with Geoff Trickey
The AlphaMind Podcast: The Risk Personality Episode
The Actuary Magazine: Modelling Minds