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Anneke Zwart Student (University), Netherlands
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Risk Attitude? How to Become a Less Risk-Averse Person…
🔥 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:
- 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.
- 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.
- 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
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Jaap de Jonge Editor, Netherlands
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Risk Appetite of Decision-makers 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.
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Philippe Barteau Entrepreneur, France
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Risk Appetite of Organizations In a literal sense, defining your appetite means defining how "hungry" you are for risk.
WHAT IS ORGANIZATIONAL RISK APPETITE? DEFINITION
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".
WHAT LEVEL OF RISK APPETITE IS BEST?
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:
- AVERSE - Avoidance of risk and uncertainty is a key organization objective.
- MINIMAL - Preference for ultra-safe options that are low risk and only have a potential for limited reward.
- CAUTIOUS - Preference for safe options that have a low degree of risk and may only have limited potential for reward.
- 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.
- 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.
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Therese Palange Project Manager, France
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7 Ways to Cure an Aversion to Risk 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 C...
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Ben Smith Manager, United Kingdom
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Stress Reduces your Appetite for Risk 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 thinki...
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Paramathmuni srinivas Kumar India
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Deficit in Looking Inward Decreases Hunger of Risk-taking 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 impression...
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Gregory Johnson Coach, United States
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Chosen Risk Profile 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 bus...
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Yuriy Duchev CxO / Board, Ukraine
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What Level of Risk is Acceptable to You? 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...
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PRASAD SN Professor, India
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Risk is a Perception 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...
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Jeff Washburn Strategy Consultant, United States
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How to Expand Your Risk Horizon 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 ...
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Maurice Hogarth Consultant, United Kingdom
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How to Develop an Appropriate Attitude to Risk 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 f...
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