360inControl® - Blog | Heike Klaus/24. September 2024/360inControl® NEWSLETTER, Risk Management
Elliot Phillips
Elliot Phillips is a seasoned Senior Consultant Psychologist at PCL applying his passion for psychology and psychometric assessments to governance processes, change initiatives, and team development within a range of organisations. Elliot has a proven track record of helping companies utilise the psychological insights offered by psychometric assessments. His client-focused approach and deep psychological knowledge make him a trusted partner in ensuring businesses are both compliant and competitive.
Geoff Trickey
Geoff Trickey is a renowned British psychologist and founder of Psychological Consultancy Ltd (PCL), a firm with decades of experience in applied psychology specialising in innovative psychometric tools and assessments. Trickey is best known for his work on risk-taking behaviour, particularly through the development of the Risk Type Compass, a unique tool that helps individuals and organisations understand and manage risk dispositions. Under his leadership, PCL has become a leader in delivering cutting-edge personality assessments for talent management, leadership development, and risk management, offering evidence-based insights for enhancing workplace performance and decision-making.
Introduction
Human factors in relation to risk and governance are all too often overlooked or underemphasised in favour of complex models and risk management algorithms. But as Michael Mazaar, Senior Political Scientist at the RAND Corporation, quotes ‘Risk failures are mostly attributable to human factors’.
Psychologists at PCL are championing a new perspective on risk governance which emphasises understanding and embracing the human factors in risk and decision making at the individual, team, and organisational level.
Risk is woven into the fabric of every organisation, with individuals managing it through their decision-making processes. However, people approach decision-making differently. These differences are rooted in our nature but are often misunderstood and fail to be accounted for in risk management practices. On a large scale, these human factors impact risk-taking and decision-making across the entirety of an organisation. Differing perspectives on risk, uncertainty, and decision making are also undercurrents that drive the disconnect often found between Boards and Risk Managers.
Understanding the complexities of people and effectively accommodating their differences is challenging but cannot be ignored. Psychology can help shed some light on how to understand peoples risk dispositions. Not only can these dispositions be understood, but they can be measured reliably and accurately. Psychological Consultancy Ltd (PCL) have developed a psychometric tool which provides insight into the risk dispositions of individuals, how they aggregate when in teams, and the cultural influence they have an organisational level.
Risk dispositions depend on the interaction between emotion and reason, and these are the two dominant influences in a person’s mental life. To fully grasp their implications is not a simple matter. How much risk we are comfortable with and why we approach decision making in the way we do are matters of self-awareness and personal insight, and there is always room for growth.
The Risk Type Compass
The Risk Type Compass places everyone within a 360-degree spectrum of risk dispositions based on the assessment of Emotion and Cognition. This is segmented into eight distinctive Risk Types as a basis for interpretation. It provides a basis for improving our understanding of ourselves and others, who we are, and why we make the decisions that we do.
“The people make the place” – Benjamin Schneider
By aggregating individual Risk Type data, the Risk Type Compass creates an interactive snapshot of risk propensity within and between teams across an organisation.
Is the organisation predominantly risk-taking or risk-averse? In which section, division, and function are they concentrated? Which teams are evenly balanced? Unlocking risk culture in this pragmatic way provides clarity on where intervention may be needed. Are there areas of the business where the balance is counterintuitive (like a dominantly risk-taking Board who have to work closely with a risk-averse team of Risk Managers), or where a too similarly disposed section would be vulnerable to groupthink?
The Risk Landscape
This Risk Landscape enables boards and c-suites to assess team composition, supporting ‘what-if‘ risk scenarios, and identify signs of groupthink or resistance to change. Armed with this knowledge, you can implement proactive measures to shape a culture of informed decision making and risk resilience. Each of the “nodes” in a Landscape represents a team, and within the Risk Landscape platform, you can interrogate the composition of Risk Types within each team. Who are the people championing the opportunity that comes with risk? And who prioritises caution, consideration, and vigilance when approaching decision making?
Going through this exercise, the organisation’s human factors around risk and decision making can be examined. Board members can understand what their composition is like from a risk disposition perspective, helping members understand how individual tendencies influence collective decision-making. For Risk Managers, it fosters a greater awareness of the differences between their perspective on risk and those of the Board. This allows both parties to manage their interactions more effectively and reduce potential conflicts. Together, this shared understanding equips them to better address one of the “soft factors” of risk management — human variation in risk dispositions across the organisation. In a future article, we will walk you through a full case study to outline how each of these outcomes are achieved.
What’s your Risk Type?
The Risk Type Compass is a BPS approved psychometric assessment. If you’d like to find out your Risk Type, you can complete a complimentary version of the Risk Type Compass here. If you want to access a demo of the Risk Landscape click here [link pending].
For more information about how the tool supports the identification of risk dispositions in the boardroom and beyond, get in touch!
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