Rolling the Dice

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LEADERSHIP

Words: Amy Duff Illustration: Nick Kobyluch

Risk tolerance is often the difference between success and failure in business. But just how well do directors cope with jeopardy? We invite a group of leaders to undergo a psychological test

that you think you can walk on water. Which you can’t,” he explains. What we’re talking about is disposition, he adds. “It’s not how you present yourself to others, or the way you behave in the office, or even your attitude—which is superficial and can change and be influenced by others—it’s your fundamental nature which is hardwired.” Ropeik says the system by which we respond to risk is remarkable. It’s “a complex mix of neural wiring and chemistry, subconscious psychological processes and instincts, and fact-based cognitive firepower. It’s fascinating and powerful. It’s in charge of our survival.” In his book, Ropeik lists suggestions to help readers make “healthier choices” about risks. The Psychological Consultancy has developed the Risk-Type Compass, which assesses risk tolerance based on personality and identifies individuals as one of eight types (see panel). Its purpose, says Trickey, is to encourage leaders to understand what they can and can’t do. “Any asset has a potential downside,” he says. “Anybody who reaches a prominent position will have strong personality characteristics. Being very confident, for example, is superb but it can also make you oblivious to other people’s concerns. It can be a strength and your Achilles heel.” The compass also helps directors to create roles for people that will suit their

Rolling the dice

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re these the riskiest times we’ve ever faced? An internet news search suggests that society and our personal and business lives are being constantly informed by perceived uncertainties. On one day towards the end of last year, French economy minister Christine Lagarde told us that the eurozone was not at risk of breaking up despite jitters over Ireland’s creditworthiness; Qatar was the only one of nine contenders to stage the World Cup in 2018 or 2022 to receive an overall “high” operational risk rating from 28

Director.co.uk January 2011

Fifa; and if you took regular exercise as part of a healthy lifestyle, you could slow down how quickly the body ages and cut your risk of developing dementia. Whole industries have grown up around risk. Pensions, insurance, investments, business continuity, health and safety, reputation, governance, law… you name it and there’ll be a profession to sell you something or advise you on the threats and opportunities associated with risk. The media likes to play with our perceptions, too. As David Ropeik, author of How Risky Is It, Really? writes: “The news

media tend to play up the scary, the negative and the dramatic aspect of things… it often seems darker and more threatening than things really are.” The spread of the internet and social media, he adds, “has created millions of new advocates adding their voice to society’s 24/7 Tower of Babel about risk issues, all trying to shape what you and I think.” Putting hype to one side, risk is an inevitable part of business and can be a key ingredient to success or failure. But rather than focus on processes and procedures such as governance or compliance, says

Geoff Trickey, managing director of the Psychological Consultancy, he says it’s more useful for directors to understand how different personalities within an organisation will respond to risk and then build a balanced team that combines risktakers with those who are more risk-averse. “It’s always beneficial to know about what you are really like deep down because that’s how, in the end, you respond, particularly under pressure. And sometimes even more dangerously, when things are going so well that you develop a confidence and hubris about everything

So what type of risk-taker are you? Spontaneous Impulsive and excitable, the spontaneous type enjoys the unconstrained nature of unplanned decisions. Attracted to risk like moths to a flame but distraught when things go wrong. Passion and imprudence make them exciting but unpredictable.

Intense Highly-strung, anxious, alert to risk and fearful of threat to their precarious equilibrium, intense types invest a lot emotionally in people and projects, and are nervous about failure. Passionate and selfcritical, they take it personally when things don’t work out.

Wary Self-disciplined and guarded about risk, the wary type is organised but unadventurous and puts security at the top of the agenda. Drawn to the idea of securing a future but anxious that something may go wrong.

Prudent Very self-controlled and detailed, the prudent type is systematic, conservative and conforming. Conventional, they prefer continuity to variety and feel most comfortable sticking to what they know.

Deliberate

“BEING CONFIDENT IS SUPERB BUT IT CAN ALSO MAKE YOU OBLIVIOUS TO OTHER PEOPLE’S CONCERNS. IT CAN BE A STRENGTH AND YOUR ACHILLES HEEL”

Self-confident, systematic and compliant, the deliberate type tends to be unusually calm and optimistic. They experience little anxiety and tackle risk in a business-like and unemotional way.

personality and deploy them to the best advantage. Directors we asked to take the survey reckon the tool offers food for thought. All believe that they’re regularly exposed to a degree of business risk. Mat Maddocks (“adventurous”), product manager at risk management software company Russell Consulting, says there’s always risk in a small business. “Big companies have much more resource, you’re up against the fact that they could do some of what we do for themselves. And the technology landscape is challenging— the pace of development is dramatic, so

Adventurous

Composed Cool-headed, calm and unemotional, but at the extreme, the composed type is almost oblivious to risk unaware of its effect on others. Imperturbable and manages stress exceptionally well.

Impulsive and fearless, but at the extreme, the adventurous type combines calmness with impulsiveness and a disregard for convention. Unconcerned about risk.

Carefree Impulsive and unconventional, carefree types are adventurous, excitement-seeking and, in extreme cases, reckless. Impatience and impulsiveness expose them to making hasty, imprudent decisions. Source: the Psychological Consultancy

January 2011 Director.co.uk

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