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.