Are You a Risk Cowboy? Why Companies are Lagging in Risk Management

The Resilient Enterprise | The riskmethods Blog

Are you a risk cowboy? Find out how a cavalier mindset and a rise in narcissism has shaped the risk culture of businesses. Then learn why risk cowboys are on the way out—and find out the 5 reasons that you should be hanging up your cowboy hat and changing your own attitude toward risk.

by Bill DeMartino

Here at riskmethods, we spend a lot of time talking about a company’s risk culture. Is it proactive or reactive? Is it risk tolerant or risk averse? And even more importantly: Why is it this way?

The American approach to risk in business is influenced by the American mindset, which has a tendency to be cavalier about risk in general. You could even say that America is a nation of risk cowboys: that is, people who are open to living unpredictable, potentially dangerous lives. After all, America is a nation founded and expanded by pioneers who were ready to face the uncertainty of a new life. To be American was to be a risk-taker—and this attitude has, in some ways, carried through to the present day.

To make matters more extreme, there’s an additional dimension to consider: A rise in narcissism in Western civilization. In 1963, when adolescents were asked if they considered themselves important, only 12% answered affirmatively. 30 years later, that percentage had risen to 80%. A person who considers him- or herself important is probably more likely to perceive his or her actions as correct, and less likely to change course, even in the face of evidence that suggests he or she should.

What does this mean for businesses? Simple: It means they lag behind where they should be when it comes to risk management. They think they won’t be affected—and even if they are affected, a tendency toward narcissism might lead them to think they won’t be affected again. When you add this to all the other factors that might delay a risk management program—busy with other responsibilities, resistance to change, organizational silos that make collaborating difficult—the result is obvious: risk management gets shoved under the table for other, more easily-solvable problems. Occasionally, the squeaky wheel risk event—Brexit, major tariff changes, a big cyber attack—might get some attention temporarily. But a more holistic program will be delayed again and again.

Don’t despair. For those of us who realize that cowboys probably aren’t the best role model when it comes to making business decisions, there’s some good news: The times are changing. As risk management begins to emerge as a discipline, the leaders are showing the rest of the world that by recognizing that they are at risk, and by taking steps to mitigate it, they are creating a safer environment for their company.

So why shouldn’t you be a risk cowboy? Here are 5 reasons.

  1. Because your bottom line will look better. The bottom line is the bottom line: A strong risk management program will save you money—while also giving you a leg up on your competitors who can’t get ahead of risk events as quickly as you can.
  2. Because your customers are expecting more from you. These days, consumers want to do more than buy your goods—they want to know where they’re coming from, and how you’re making them. A strong risk management program can make sure you’re looking good to your customers. (Check out our recent webinar with Clariant to see how they use a risk management program to manage sustainability initiatives.)
  3. Because the government is prohibiting it. More and more industries are facing regulations and standards that they’re required to follow, whether it’s about sustainability, safety or quality. Ensuring that your company is adhering to these regulations and standards is an important part of a risk management program.
  4. Because risk management jobs attract and retain talent. Risk management is an emerging discipline with a growing number of practitioners. With a strong risk management program, you can make your company better and stronger—while also attracting new talent.
  5. Because being a hero is better than being a cowboy. Do you want to be the one who almost drives your company off a cliff, or the one who swoops down from above to rescue it right before it falls? Right, I thought so. The world needs more risk heroes, and fewer risk cowboys.

So to all you risk cowboys out there: It’s time to take off your hat and shake off that cavalier attitude. Switch out your cowboy getup for a cape—and become a risk hero by showing your company that managing risk is going to make your business better and your customers happier.

(You can keep the cowboy boots, though. Everybody needs a good pair of boots.)

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