Risk Averse vs. Risk Tolerant

How many times have your heard:   

• “Safety is Job 1”

• “Safety before anything else”

• “The first step is Safety”

• “Safety is no accident”

• “Safety is our  business” 

If you have, my guess is that you come from some operational background – manufacturing, construction, production…

In many industries, safety has to and does come first.  The danger is when this risk aversion carries over into managerial decision making.  Managers can not afford to be risk averse when making decisions about innovation, technology, or strategic direction.   As the epic, Roman poet, Virgil said, “Fortune favors the bold.” 

In my discussions with managers, I have helped them separate Operational Risk from Managerial Risk.   When a manager has “grown” up in operational environment before moving into a managerial position, they can be risk averse.  This makes perfect sense.  They were groomed to be risk averse.  Risk is bad.  An accident could cost you your job or your life.  “Be careful out there.”

But, at the same time, risk taking is not always bad.  Risk taking is often lauded.  Spending money on innovation, R&D, and the unknown is risky, but with a possible healthy reward.  To quote Robert F. Kennedy:  “There are costs and risks to a program of action, but they are far less than the long-range risks and costs of comfortable inaction.”   Action in the face of is good. 

So, why blog about this?  When considering any decision, managers need to assess whether it involves operational risk or managerial risk.  If it is operational risk, safety first.  If it is managerial risk, then go for it.  The key is to not apply an automatic, learned risk aversion.  Operational risk should be avoided AND managerial risk should be embraced. 

Are you operationally risk averse and mangerially risk tolerant?