Does Your Risk Tolerance impact on quality decision making?

Risk Tolerance

As a member of many different decision-making bodies which considers risk, it is important to ensure that the assessment of risk is objective, detailed and supported by data. Take care to ensure results are not skewed toward a risk score based on subjective factors and the limitations of the organisation to resource and communicate effectively with the various decision makers and interested parties. 

Variations in outcomes are most evident during routine safety risk assessment, where a team member will suggest an impact for a risk based on their own personal experience. A common approach is to moderate this result through the introduction of other team members during consultation or by introducing historical data to provide a more objective view.

At the Executive Level it is unusual for you to be involved in the collection of data and the detailed analysis, and therefore your ability to identify a skew in objectivity can be more difficult. 

To overcome this your communication must include the need for objective data based decision-making and time to consult. If you do not, your teams may base their approach on the message you purvey in relation to other matters. People will align their perception to what is understood to be your tolerance for risk. 

In some cases, depending on the maturity of culture, decision-makers may anticipate the response they believe they are likely to get from you and brush over contrary evidence early in the process. 

This motivated reasoning can undermine the collection of objective evidence, the analysis reinforces the subjective view and the outcome is usually “what we already thought”.  Julia Galef discusses Motived Reasoning in her TED Talk here.

As a leader of an organisation it is essential that you emphasize the importance of objective analysis without bringing your own historical bias into the room. You may have your own “intolerance” which you often speak about, which leads others to believe similar risk is also intolerable. Your role is to ensure there is adequate diligence around the data, and to make sure you are supportive of a thorough process to identify risk and reward.

Since the first case of COVID19 in Australia the consistency in decisions, “based on the science”, has varied widely in the various states and territories throughout Australia. The actions and message has varied as a result. Each political leader has their own motivation, their own staff, their own style and their own set of circumstances which influence the thinking of those who work for them. Just take a moment to consider the various leaders and where they may rank, from a perception point of view.

Despite the ongoing communication about how the decisions are “based on science”, and agreed to by the Australian Health Principal Committee, there continues to be significant variation in the approach to border closures and the methods of control that are implemented by the respective states and territories. This can only come down to one factor, the understanding of the level of tolerance to risk within the team of decision makers. 

If you have any specific aspects, you’d like more information on or if you have further questions, reach out by clicking here!

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