Risk e-Views Vol 5 February 2011 – Risk Leadership: Matching Employees with Risk Appetite

To ensure you have the correct risk leaders in the correct place in your organisation, you need to consciously match your employee’s appetite for risk with your organisation’s appetite for risk. Here is a brief checklist for you to consider when resourcing a business unit:


Assess the risk appetite
Assess the leader
Adjust the team
Identify the Plateaus


1. Assess the risk appetite – Consider the business unit’s role and objectives in meeting the overall objectives of the organisation. Consider the organisation’s risk appetite and set out the risk appetite for the business unit.

2. Assess the leader – What type of leader do you have in the role now and what type did you have in the past? What levels of desire for risk taking have they shown? What impact has this had on the success of the business unit? What is required now? If you are recruiting a new leader, consider psychological profiling inclusive of their affinity for risk taking/risk avoidance.

3. Adjust the team – Once you understand the risk appetite you want the business unit to have and the risk taking profile of the leader you have or are about to recruit, you need to start adjusting the team. A team at odds with the risk appetite has obvious problems for the business unit and for the manager. Perhaps you have a good manager with not quite the right attitude to risk taking and you need a team to help shift him or her. A mildly cautious manager with a gregarious group of keen risk takers can be a powerful mixture.

4. Identify the plateaus – As time passes the risk appetite for the business unit will inevitably change. You can predict this to a certain extent. New businesses need complexity and risk taking to get moving but as they reach their initially intended plateau there is often a need to reduce complexity and reap rewards with reduced risk of moving too far backwards. Once the base is secured, new goals are soon established and the need for increased complexity and risk taking returns. Similarly if your business is highly cyclical, you will need to adjust risk appetite over the cycle. If you identify the different plateaus in the cycle early you will be able to adjust your team or shuffle your risk leaders around accordingly.