DEFENCE PROJECT MANAGEMENT 2007

MEETING THE CHALLENGES OF TODAY; PREPARING FOR THOSE OF TOMORROW

Understanding and managing risk attitude

Dr David Hillson FRSA FIRM

Director, Risk Doctor & Partners

Ruth Murray-Webster MBA

Director, Lucidus Consulting
2007 David Hillson/Ruth Murray-Webster, Slide 1

People & the risk process

The Critical Success Factor!

People are responsible for :
setting

risk acceptability thresholds risks (threats & opportunities) probability & impacts appropriate responses agreed actions

identifying assessing proposing

implementing

All affected by risk attitude

2007 David Hillson/Ruth Murray-Webster, Slide 2

Understanding risk attitude

2007 David Hillson/Ruth Murray-Webster, Slide 3

What is risk?

Uncertainty that matters

Any

uncertain event or set of circumstances which, if it occurs, will have a positive or negative effect on achievement of one or more objectives

Only defined in relation to something specific What is at risk ? (objectives) Affected by perception
How

uncertain? How much does it matter?

2007 David Hillson/Ruth Murray-Webster, Slide 4

What is attitude?

Two definitions:
1. 2.

State of mind in relation to a fact or situation Orientation of axes in relation to a reference plane

People and aeroplanes:

Direction of lean chosen to achieve desired outcome Attitude motion, choice must be followed by action Various components of attitude (pitch/roll/yaw) Multiple options in given situation, no right answer May have preferred default option but can still choose
2007 David Hillson/Ruth Murray-Webster, Slide 5

What is attitude?

Chosen response to given situation Only defined in relation to something specific Attitude towards what ? Affected by perception of situation

What do I think it is? [Does this sound familiar ???]

2007 David Hillson/Ruth Murray-Webster, Slide 6

What is risk attitude?

Risk Attitude = Risk + Attitude Chosen response to uncertainty that matters, influenced by perception Risk attitude operates at many levels:
individual,

groups, society, nations

Risk attitude exists on a spectrum

2007 David Hillson/Ruth Murray-Webster, Slide 7

RISK ADDICTED

COMFORT LEVEL

COMFORT LEVEL

EXTREME HIGH LOW ZERO

RESPONSE TO UNCERTAINTY

RISK SEEKING

EXTREME HIGH LOW ZERO LOW HIGH

RESPONSE TO UNCERTAINTY

DISCOMFORT LEVEL

DISCOMFORT LEVEL

LOW HIGH EXTREME

RISK AVERSE

RISK TOLERANT

EXTREME

RISK PARANOID

short-term

RISK NEUTRAL

long-term

2007 David Hillson/Ruth Murray-Webster, Slide 8

Where are you on the risk attitude spectrum?

It depends
On
external

environment (situation) internal environment (me/us)

And where should you be?

It depends
On
objectives

2007 David Hillson/Ruth Murray-Webster, Slide 9

Risk management & decision-making

Both involve uncertainty

The

problem with the future is that more things might happen than will happen (Plato) is the primary task of any manager

Both matter
Decision-making
(Drucker)

Zero risk is neither possible nor desirable

Appropriate

risk-taking must be followed by effective risk management (Hillson & Murray-Webster)

2007 David Hillson/Ruth Murray-Webster, Slide 10

Defence Values for Acquisition: some links to appropriate risk-taking

Allow space for innovation Put risk where it can be managed most effectively Value openness and transparency avoid wasted effort Value objectivity based on clear evidence rather than advocacy

2007 David Hillson/Ruth Murray-Webster, Slide 11

Managing risk attitude

2007 David Hillson/Ruth Murray-Webster, Slide 12

Risk attitude summary (so far)

Risk attitude is:

situational

(not fixed) chosen in response to a given uncertain situation exhibited by individuals and groups affected by perception

Risk management is not just rational process

Risk attitude must can be managed ! but HOW ?

2007 David Hillson/Ruth Murray-Webster, Slide 13

Emotional Intelligence

1983, Howard Gardner Multiple intelligences

IQ

= 20% of what a person can achieve?

1989 Salovey & Mayer Emotional intelligence 1990s EI popularised by Daniel Goleman
Measured

as EQ

Emotional Literacy

Less well known term in business literature Implies can be learned, nurtured, developed Not fixed
2007 David Hillson/Ruth Murray-Webster, Slide 14

The 4 As Basic steps to Emotional Literacy

1. Recognise emotions Awareness

and acknowledge them as entirely natural Why do I feel them, do they help or hinder? in a way that supports your objective

2. Understand emotions Appreciation

3. Appropriately express emotions Assertion

4. Deal with emotions

Action
2007 David Hillson/Ruth Murray-Webster, Slide 15

Dont have to be a victim

Using the 4 As to manage risk attitude

Awareness

Of how your perception, or others perception of a risky situation will shape risk attitude and behaviour More than understanding, respect for differing views as a basis for engaging and changing if necessary Needs and issues will need to be articulated if risk attitude is to change Willingness to take action and be resilient in the pursuit of goals, beyond good intentions
2007 David Hillson/Ruth Murray-Webster, Slide 16

Appreciation

Assertion

Action

Practical steps - 1

Awareness of self and others and sources of bias in perception

Situational,

conscious factors, e.g. familiarity Sub-conscious heuristics or cognitive bias, e.g. availability or optimism bias Feelings/emotions love is blind? Group dynamics, organisational cultural sameness, national cultural differences

Great facilitation can help undercover bias in a non-threatening way

2007 David Hillson/Ruth Murray-Webster, Slide 17

Practical steps 2

Appreciation of self and others

Empathy

for others point of view Confidence in your own (but not overconfidence that blinds you)

Use the data you have to reduce subjectivity, consider the value of spending time and money to get information. Yet recognise that some risk assessment is always subjective, some things that matter cant be modelled in tangible units?
2007 David Hillson/Ruth Murray-Webster, Slide 18

So what ?

2007 David Hillson/Ruth Murray-Webster, Slide 19

Why this is important

Risk is uncertainty that matters, must be managed Decision-making is risky Risk attitude is chosen response to uncertainty that matters, affected by perception Risk management is affected by risk attitude Effective risk management requires risk attitudes to be understood & managed Emotional Literacy offers a proven effective approach
2007 David Hillson/Ruth Murray-Webster, Slide 20

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RISK ATTITUDE
IGNORED UNDERSTOOD & UNMANAGED & MANAGED

CRITICAL SOURCE OF FAILURE

CRITICAL SUCCESS FACTOR

CSF
LOW
RISK MANAGEMENT EFFECTIVENESS

HIGH

2007 David Hillson/Ruth Murray-Webster, Slide 21

Summary

Risk is managed by people not robots

Risk

attitudes are vital Individual & groups Affected by perception

Awareness understanding management

Know

thyself

Use emotional literacy to manage risk attitude Only then will risk management & decision-making be fully effective
2007 David Hillson/Ruth Murray-Webster, Slide 22

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Further details are in David & Ruths book, Understanding & Managing Risk Attitude Gower, 2007, ISBN 978-0-566-08798-1

Visit www.risk-attitude.com for 25% discount

2007 David Hillson/Ruth Murray-Webster, Slide 23

For further information

David Hillson
Risk Doctor & Partners Tel +44(0)7717.665222 david@risk-doctor.com

Ruth Murray-Webster
Lucidus Consulting Tel +44(0)7974.943443 ruth@lucidusconsulting.com

www.risk-attitude.com
2007 David Hillson/Ruth Murray-Webster, Slide 24

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