06/03/2015

By Gabrielle Ramsay Smith, Ramsay Smith Consulting


What type of ‘risk taker’ are you? Do you ever make decisions using your ‘gut feel’?

A recent survey conducted for Time Magazine showed 62% of Senior Executives rely on their gut feel to make decisions. And each decision we make has an impact on the business, either positively or negatively. But how do you know the basis of your ‘gut feel’?

For example, would you rather risk your career or your leisure time? Do you consider yourself to be conservative with your risk taking or more Gung Ho? Do you make decisions quickly or take a long time? And what is quick to you – an hour, a day or six months? And what about the people in your business? What type of risk takers are they? Are some of them challenging, confident and see nothing wrong with breaking the rules; and others vigilant, cautious and wouldn’t dream of stepping outside the agreed process?

We need a healthy tension of risky behaviour otherwise the company will tip one way or the other, with risky businesses spiralling out of control and risk averse businesses standing still. Most businesses have a wide spectrum of people with individual characteristics who add their unique value. But the same people also pose a huge risk to your business when they use their ‘gut feel’.

In risk terms we need to start thinking of people’s actions as ‘speculative risks’ – a bit like putting a bet on a horse to win. We are all too familiar with the high profile headlines of Tesco’s overstating their profits, or the practices of the News of the World, or the banking LIBOR scandal which all highlight that the decisions people make at work can cause a significant problem to business. But there are many stories that don't hit the headlines that cost businesses every day where people have made decisions or tried to solve problems in a way that have negatively impacted on productivity and profitability. You can probably recall a situation yourself.

So how do businesses go about ensuring that the risks their people take daily lead to success and not failure? How do we ensure that our business doesn’t end up in the headlines because of someone’s silly mistake or bad judgement?

Due to the many complex circumstances we face at work each day we cannot completely programme people or push them down a scripted pipeline, some businesses try but find it’s impossible to have a plan for every eventuality – plus it curbs initiative and common sense. I remember going to a pub once where I asked for a ham and cheese sandwich only to be told that I could have a ham sandwich or a cheese one but not a combination as they didn’t know how to order it or charge for it!

So we set a framework within which people can exercise their discretion by having policies, processes and procedures. But human beings are creative, competitive and unpredictable and they take risks daily that they don’t even know they’re taking which are exacerbated when they are under stress and can cause them to do unpredictable things that seem completely out of character.

We also need to create freedom with responsibility and ensure that the discretion people use is done so intelligently. The first step is to identify what type of risk takers you have, where they are in your business and understand the potential impact they have, both positively and negatively. Without this detail of information, we cannot manage people risks or put measures in place, therefore, we cannot accurately plan. What we live with is the unpredictable dealing with the unexpected which doesn’t make sense and is fraught with risk.

The second step is to understand the effects of the various different risk takers, identify the potential risks that they create and deal with them. Our risk profiles interact with each other and have a knock-on effect with others, like a kaleidoscope. For example, if your risk profile is different from mine, I might not listen to you at all. If it’s the same we might accelerate each other’s riskiness, or ignore the things we don’t think are important. A surgeon I once knew decided to bend the rules and treat a patient that was outside his licence to practice. The office staff knew of this and thought that rule breaking was ok, especially if they considered it less important. Pre-empting potential problems caused by our tangle of risk profiles, allows us to put systems in place to prevent them from happening.

The third step is to look at team risk profiles to see where the strongest influence is and address the impact that they have on company goals and team objectives. Companies have different risk attitudes, as do departments, for example, you would expect the sales and marketing department to be higher risk takers than the audit department, or recruitment consultants to be higher risk takers than accountants. But what about the board of directors or the senior management team, what type of risk takers are they and what messages do they give collectively? Understanding team risk taking highlights the strengths and gaps so that you can decide if you need to obtain an alternative view before reaching a decision and shows the influence of ‘group think’.

How much risk taking goes on in your business? To do a quick assessment click here. The results will help you decide if you need to know more about the risks people take at work, daily and how they put you and your business at risk.