Risk Attitude? How to Become a Less Risk-Averse Person…

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Risk Attitude? How to Become a Less Risk-Averse Person…
Anneke Zwart, Student (University), Netherlands, Moderator
In today’s dynamic and ever-changing economy, the times of having a secured job for the rest of your life are past. All of us now need to make choices regularly that will influence our life and career path. Living a safe life does not mean to do the things the way they’ve always been done anymore. Actually, doing nothing in today's times of uncertainty could actually be more risky than not taking chances at all. So risk-taking is nowadays more and more a critical factor for success.

But not all people are natural-born risk-takers. And there are many factors that influence the degree to which we are taking risks and are acting rational or irrational. Past experiences, emotional histories and cultural factors all play a role.
Giang (2017) describes 3 ways to make yourself more comfortable with taking a chance. According to her, you can control (to a certain extent) the psychological responses that hinder you from taking chances by overcoming certain psychological issues. Here are some techniques to make yourself more comfortable with taking risks:
  1. SILENCE THE MIND: This refers to training methods that learns one to focus on the present. Those techniques can help you to prevent rethinking your mistakes and worries (brain chatter). Living a healthy lifestyle and being mindful are said to control and lower (among others) adrenaline and cortisol levels, which in turn reduce the amount of stress you perceive with taking risks.
  2. ENGAGE THE UNCONSCIOUS MIND: Many agree that a large part of our mental activity is unconscious. You should take the time to let your subconscious mind become active through napping, resting or even adopting a persona.
  3. REMOVE CATASTROPHIC THINKING: one of the greatest challenges is to conquer bad memories with previously taken risks. Most of this type of thinking originates from the fear of being out of control; of being afraid of what’s coming next. It may help to think about possible positive outcomes, but also to write down bad irrational thoughts and to reflect on those thoughts. Summing up all worst-case scenarios might make you feel more in control over the situation.
Above techniques are by no means an attempt to say that one should take every possible risk that passes. Rather they are about training your brain to deal with uncertainty and risky situations in a better way. They can be helpful to constantly remind yourself of the fact that risk-taking is needed nowadays to progress, to innovate.

⇒ What is your opinion about risk-taking in business and in your personal life?
Source: Giang, Vivian (2017), “You can teach yourself to be a risk taker”, BBC Capital

Risk Appetite of Decision-makers
Jaap de Jonge, Editor, Netherlands
In short, a person's risk appetite is the level of risk (s)he is willing to accept. Some people may sometimes be willing to accept a high level of risk, because of the potential for reward. Other people may sometimes not be willing to take a lot of risk, due to for example the possibility of going bankrupt or being arrested for non-compliance with law. So risk attitude or risk appetite is the willingness (tolerance) of a person (or an organization) to accept risk in pursuit of his/her/its goals.

In general terms, someone's risk attitude can be risk-averse, risk-seeking or risk-neutral:
- A RISK-NEUTRAL attitude occurs when a decision-maker is indifferent between choices that have the same expected value. For a risk-neutral decision-maker, receiving a certain amount of 100 dollar is equivalent to the coinage of a coin for 200 dollar or nothing because the expected value is equal to 100 dollar in both cases.
- A RISK-AVERSE (RISK-AVOIDING) person has a preference for security and avoids uncertainty.
- For a RISK-SEEKING decision-maker, exactly the opposite applies. Such decision maker dares to take risks with a slight chance even if it has great consequences.
Source: Arie de Wild and Vincent Versluis, "Worstelen met risk appetite" (in Dutch), Executive FInance, March 2015.

Risk Appetite of Organizations
Philippe Barteau, Entrepreneur, France, Member
In a literal sense, defining your appetite means defining how "hungry" you are for risk.

Risk appetite is the level of risk that an organization is prepared to accept in pursuit of its objectives, and before action is deemed necessary to reduce the risk. It represents a balance between the potential benefits of innovation and the threats that change inevitably brings.

The ISO 31000 risk management standard refers to risk appetite as the "amount and type of risk that an organization is prepared to pursue, retain or take".

The appropriate level of risk appetite depends on the nature of the work undertaken and the objectives pursued. For example, when we are operating a nuclear power station, risk appetite will tend to be low, while when we are doing a software innovation project the appetitie to experiment may be very high, because we consider that short term failure could pave the way to long term success. Wikipedia mentions 5 broad levels of risk appetite a business may adopt to ensure a response to risk that is proportionate given their business objectives:
  1. AVERSE - Avoidance of risk and uncertainty is a key organization objective.
  2. MINIMAL - Preference for ultra-safe options that are low risk and only have a potential for limited reward.
  3. CAUTIOUS - Preference for safe options that have a low degree of risk and may only have limited potential for reward.
  4. OPEN - Willing to consider all potential options and choose the one most likely to result in successful delivery, while also providing an acceptable level of reward and value for money.
  5. HUNGRY - Eager to be innovative and to choose options offering potentially higher business rewards, despite greater inherent risk.
The appropriate level of risk appetite may also vary for different strategic business units or departments or functions (e.g., R&D, Finance) of an organization, with different parts of the business adopting an appetite that reflects their specific role.
Source: Wikipedia.

7 Ways to Cure an Aversion to Risk
Therese Palange, Project Manager, France, Member
Vozza (2015) published a nice list of seven ways to cure your aversion to risk:
1. Start with Small Bets
2. Let Yourself Imagine the Worst-Case Scenario
3. Develop a Portfolio of Options
4. Have Courage to Not Know
5. Don’t Confuse Taking a Risk with Gambling
6. Take Your Eyes Off the Prize
7. Be Comfortable with Good Enough
Source: Stephanie Vozza, "Seven Ways To Cure Your Aversion To Risk", Fast Company, April 2015.

Stress Reduces your Appetite for Risk
Ben Smith, Manager, United Kingdom, Member
The article mentions the consideration of stress management; if one area of our life is particularly stressful, it reduces our appetite for risk in all our life roles as it impedes our rational thinking.
I also like that about not doing anything (indecision) being more risky than taking a new step.

Deficit in Looking Inward Decreases Hunger of Risk-taking
srinivas, Lecturer, India, Member
It seems there is a correlation between a deficit of looking inward and the hunger for risk taking. Per experiential system the intensity of hunger in risk-taking is dependent on deficit of impressions in ones' inner being.

Chosen Risk Profile
Gregory Johnson, Coach, United States, Premium Member
Interesting dialogue regarding Risk Attitude. I believe risk attitude and behavior are situational. In Philippe Barteau of France mentions in closing his sharing, "may vary for different strategic business units or departments or functions (e.g., R&D, Finance) of an organization, with different parts of the business adopting an appetite that reflects their specific role."
Progressive people in leadership positions have or are required to have, as Jaap de Jonge articulates, a RISK SEEKER profile. Without this profile, an organization can, will become stagnate in taking services and products to the next level.
There are many people in leadership positions that are playing it safe through their RISK AVERSE chosen profile. For some reason "status quo" is only good for their ego or narcissistic behavior.
Look at the creation of this system we know and love called 12manage. Was it created with a specific risk attitude or profile? I would say, NOT.

What Level of Risk is Acceptable to You?
Yuriy Duchev, CxO / Board, Ukraine, Member
Of course, risk feelings and risk controlling are more and more important for all people in any position. The core question is: what is the acceptable level of the risk for you?
Risk feeling is not a management practice, it is in the mind of each person. Each person has his/her own risk feeling. As for me, I never take risk with health, never a death risk, and no risk with liberty. All other risks can be calculated in a money measure. For me an acceptable, permissible risk is if it cost 2 months of my salary.

Risk is a Perception
PRASAD SN, Professor, India, Member
Risk is a perception which may or may not be based on the knowledge of actual possible outcomes
A person who is new to the field may take higher risk as perceived by those who are experienced in that field, because that person is ignorant of the possible outcomes.
On the other hand, an expert may take risk out of sheer confidence fully with the knowledge of the outcomes, without even considering that effort as 'risk taking'.
Becoming less risk averse may be achieved mostly by self conditioning in terms of,
1. Learning about oneself- self awareness.
2. Being able to understand the fear within, facing that fear and conquering it.
3. Practice, practice, practice (of course you don't want to loose all your money with real stakes in a real situation!)
4. Learning from own and others' failures and increasing the risk appetite.
5. Not allowing the last victory to cloud the mind, leading to stoppage of learning.

How to Expand Your Risk Horizon
Jeff Washburn, Strategy Consultant, United States, Member
Does the decision at hand threaten who you are and what you want to represent? Nobel laureate Herbert Simon wrote something like, "... Problem solving is representing the problem so that the solution is apparent." Is risk aversion really the problem? It is more likely that the problem is what a person wants to represent.
- If you (singular or plural) want to be known as adventurous, then you will have to find out how to thrive in unknowable, uncertain, ambiguous circumstances.
- If you want to be known as reliable, then whatever the question, say no is a good strategy.
- But if you want to be reliable under adventurous circumstances, then you will just have to get on the learning curve and be observant and responsive. Small, safe and cheap experiments are a pretty good strategy.

How to Develop an Appropriate Attitude to Risk
Maurice Hogarth, Consultant, United Kingdom, Premium Member
Attitude underlies behaviour and usually develops early in life. The extent to which a child is shielded from risk of ‘hurt’ will influence their adult attitude to being ‘harmed’.
Children are less frightened of ‘risk’ than the modern adult:
  1. Consider the protections we now give to children - against those risks ignored in the lives of the children of the ‘60s
  2. Consider creativity: creative play gets labelled ‘childish’, is suppressed and now we have to regenerate creativity in people at work.
How to develop a balanced attitude to risk?
‘Attitude’ may be changed through rewards for behaviour. Also the ‘managing’ behaviour throughout the organisation needs to accept that every role has a risk-taking responsibility. We should revise job descriptions. Support this with training and development (in taking a "Best Balanced Decision" based on "Potential Risk Analysis") to enable people to assess and accept risk, balanced against results. Ensure that the role responsibilities, with relevant authority, are related to opportunities with appropriate rewards for risk-taking.

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