Risk Management in the C-Suite

We humans believe ourselves to be rational beings but there is much evidence to the contrary. Self interest is a significant driver in our decision making as is the tendency to reference our self-worth through the eyes of others.

People who find themselves trapped in a losing course of action often persist irrationally, sometimes to devastating effect. The more powerful the person the greater the potential impact of such irrational persistence and the harder it is to interject.

Examples of Irrational Persistence among leaders can be seen where:

• Poor decisions are made and there is an aversion to changing direction for fear of losing face; or
• There has been an investment in time and/or money and a reluctance to cease the activity as it would require an acceptance of losses; or
• Evidence to prove a hypothesis is sought with enthusiasm while evidence to the contrary is not sought and if proposed, is ignored.

Risk managers need to be aware of the risks individuals’ behaviours and motivations bring to the organisation, and of course, be particularly aware that individuals with the greatest power bring the greatest risk.

Seamus@GovernanceMatters.ie

July 2020