We need risk-ready leaders
-Geoff Trickey is managing director of The Psychological Consultancy. The opinions expressed are his own.-
France is being rocked by its biggest financial scandal as Societe Generale is standing against ‘rogue trader’ Jerome Kerviel who is accused of gambling away nearly five billion euros. The core tenet of the argument comes down to risk. That as an employee Jerome was “encouraged” by his bosses to take risks while his bosses accuses him of taking “inhuman” risks.
Organisations need to understand how people instinctively respond to risk and the extent to which, in any situation, an individual can be the most significant risk factor. In the aftermath of the banking crisis, and with news headlines of rogue traders, there is, of course, a desire to solve these problems although this is mostly evidenced by an unhelpfully emotive atmosphere of blame and recrimination.
Organisations are ambivalent about risk. For many it is a key ingredient for business success and is an encouraged behaviour whether in an entrepreneurial start-up or a large multi-national organisation. For others, risk is a health and safety obsession, identifying what is out there that can harm us.
Organisations strategise about operational risk, compliance and governance, yet there is little appetite for discussions about the individuals involved and their contribution to the risk equation. As in the case of Societe Generale, it is only when it is too late that the personality involved comes under the microscope.
These issues are about deeply rooted personality characteristics, not about attitudes. Attitudes are easily influenced by the current climate of opinion and a person’s attitude to risk is an unstable basis for any long-term decisions. We have seen this in the nation’s attitude to debt that has managed a complete u-turn since the start of the recession as both business and private debt is repaid at unprecedented rates.
Research tells us that personality based assessments offer the best guide to risk behaviour. Personality assessment has become an established part of the recruitment process but the focus has not been on risk profiling of prospective employees yet there are a number of underlying aspects of temperament that determine the way we each respond to risk.
Understanding whether individuals can be classified as wary, adventurous, impetuous or deliberate, for example, when it comes to their distinctive risk type enables organisations to get to grips with issues relating to risk and how it might affect their business. 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. But it’s a disaster to get it the wrong way round.
Understanding the risk types within any organisation makes it possible articulate the human factor associated with it. It allows organisations to better understand how individuals will react under pressure and to balance out teams and departments so the necessary checks and balances are in place. In a changing and challenging business environment, organisations need to deploy their people to the best advantage while protecting themselves from the rogue element that will hit the headlines.