In this Digital Age, Risk-Aversion can be Costly

Research by McKinsey identified some of the biggest barriers to success of companies in the digital age, and found that it came down to organisational culture. When companies are afraid to take risks, have organisational siloes, and lack a strong customer-focus, they are liable to fall behind or fail.

These cultural obstacles are correlated with negative economic performance. Leaders need to be proactive in managing culture, because if they wait for it to change organically, it will be too slow. Great decision-making cultures are created intentionally, and attitudes are modelled from the top down. Ideally, there should be trust and a growth mentality, where learnings from failures are celebrated. This allows innovation and more agile decision-making.

 

Companies that take a risk-averse approach may be too slow to respond to the rapid speed of change. When they try to avoid financial risk, they may underinvest in strategic opportunities, so their efforts to protect capital can backfire. It can be tricky to strike the right balance between risk-taking and careful consideration of potential problems, but research has shown that embracing risk is key to organisational success in the digital age.

 

Cultural changes of organisations will always be slower and more complex than the pace of change necessitates. It’s so important to be proactive in creating a culture that’s customer-focused, lacking siloes, and not averse to risk.

Want to know more?

Are you interested in creating a culture that embraces risk, and finding the optimal balance between risk and reward? Not sure how to go about it?

The Risk Type Compass provides fascinating insights into individual and group decision-making and risk-taking. It allows a lens through which the company and its people can increase self-awareness, make better decisions, and intentionally create the right culture.

Contact info@kinchlyons.com or call +353 1 2788 727 for more information.