A manager's leadership style is influenced by their attitude to risk

Whether, for example, they would be categorised as the prudent type – preoccupied with elimination of risk and uncertainty, or the fearless adventurous type – actively courting danger and seeking excitement, will determine their mindset and the way that they handle problems, plan for the future, motivate staff, shape economic strategy or grasp opportunities. It will contribute to their success or to their downfall, or to both. In extreme cases it may bring their organisation crashing down around their ears.

These distinctions are illustrated with particular clarity within the financial sector where risk mismanagement has provided many lurid headlines over recent years. Jerome Kerviel was accused by Société Générale of losses worth more than £4 billion; Nick Leeson’s risk-taking destroyed Barings’ the top guns of the world’s banks turned a deaf ear to caution about derivatives, sub-prime debt and Frankenstein bonds, leaving us with a financial system in tatters and a mountain of debt to shift.

Kerviel maintains that his bank knew about his risky deals, looking the other way when times were good and only intervening when it all turned sour. He may have a point. Whatever was going on between them, Société Générale should have had a more balanced approach to risk and would have saved a lot of money had they spotted Kerviel’s risky behaviour earlier. However, Société Générale is not alone, organisations rarely assess a manager’s risk profile in any reliable way as a part of the recruitment process.  

This is not something that applies only to the financial sector. Risk-taking is a necessity for any enterprise and has to play its part alongside more prudent, compliant or traditional contributions. This inherent ambivalence and complexity and the need to achieve an appropriate balance across the various functions of an organisation presents some very particular issues and challenges.

Too much attention has been given to the procedures, policies and regulation of risk, and not enough to the characteristics of those who have to handle them. After all, a pointed stick only becomes a risk when it is in the wrong hands. The tools available to assist in this process have been limited but psychometric research and the development of taxonomy of risk type is an important attempt to get to grips with these issues in a pragmatic and practical way.

 
Psychometric testing can help organisations establish an individual’s attitude to risk and, if applied strategically, can provide a balanced organisation, where there is good cross-section of risk-types and therefore a better chance that sound decisions are made, based on the long-term sustainability of an organisation.

Below are highlighted eight key risk types across a wide spectrum of psychological profiles, all of which demonstrate strengths and weaknesses related to decision-making within an organisation?

Spontaneous

A spontaneous type is impulsive and excitable. They enjoy the spontaneity of unplanned decisions and are attracted to risk like moths to a flame. However, they can become distraught when things go wrong. Their passion and imprudence make them exciting, but unpredictable.

Intense

Highly-strung, anxious, alert to any risk and fearful of any threat to their precarious equilibrium. The intense type invests a lot emotionally in people and projects and is nervous about failure. Passionate and self-critical by nature, they take it personally when things don’t work out.

Wary

Self-disciplined and cautious of risk, the wary type is organised, but unadventurous and puts security at the top of the agenda. They will be drawn to the idea of securing their future, but anxious that however well something worked for others, it will go wrong in their case.

Prudent
Very self-controlled and detailed in their planning, the prudent type is organised, systematic, conservative and conforming. Conventional in their approach, they prefer continuity to variety and are most comfortable sticking to what they know.

Deliberate
Self-confident, systematic and compliant, the deliberate type tends to be unusually calm and optimistic. They experience little anxiety and tackle risk and uncertainty in a business-like and unemotional way. They never walk into anything unprepared.

Composed
The composed type is cool-headed, calm and unemotional, but at the extreme may seem almost oblivious to risk and unaware of its affect on others. They take everything confidently in their stride, seem quite imperturbable and manage stress well

Adventurous
The adventurous type is both impulsive and fearless. At the extreme, they combine a deeply constitutional calmness with impulsivity and a willingness to challenge tradition and convention. They seem imperturbable, fearless and intrepid.

Carefree
Impulsive and unconventional, the carefree type is daring, excitement seeking and sometimes reckless. Not good at detail or careful preparation, they often seem vague about their intentions. Their impatience and impulsiveness can lead to hasty and imprudent decisions.

These descriptions are informed generalisations based on extensive personality research and while the essence of a type will be accurate for the majority of those falling into that group, individuals will vary in the degree to which type characteristics dominate their overall performance. In some cases behaviour is learned. However, while surface attitudes towards risk flex and change, an individual’s underlying personality tends to remain consistent and when things go pear-shaped and we are under pressure, we usually revert to type.

Geoff Trickey is managing director, The Psychological Consultancy

This article was first published on hrmagazine.co.uk