Is risk about the probability and measurable impact of events? Certainly, you cannot excel in a risk management program without insights into actuarial risk. But as we saw in an earlier post, risk is also about how groups of people react to uncertainty itself. The cluster of attitudes, priorities and behaviors around this kind of risk response can be called a risk style.
Such a preference or style can be something you see across a whole organization, or in smaller teams, and also individuals. And the influence of multiple, conflicting styles can be seen at all those levels.
A school of thought called Cultural Theory has tackled the problem of risk styles in recent decades—you can read more about it here. An overarching insight across styles is that it is useful to look not just at how an event would impact an organization, but also at how blame and consequences are managed and distributed across the group. The archetypal risk styles Cultural Theorists identified include:
INDIVIDUALIST: the style closest to the classical likelihood-times-impact model, this approach sees risk and opportunity as two sides of a coin, and is based on reasoning from interests and probabilities, and predicts a proportional individual response dictated by fungible INCENTIVES, or SKIN IN THE GAME, as Nassim Nicholas Taleb would say.
HIERARCHICAL: a style strongly influenced by the priorities and influence of leadership and powerful parties—key determinants of a group’s risk response are CHAIN OF COMMAND, RANK + STATUS.
EGALITARIAN: a style driven by avoiding internal inequalities created by risk —basic drivers in risk aversion and management are factors like COHESION OF GROUP and AVOIDING TURMOIL IN RANKS.
Simple tools that help manage and make the most of your risk culture are a big part of what we do—contact us today if you have any questions!