According to a recent report by Grant Thornton and the Director Bank Group on ‘What Makes An Outstanding Finance Director?’, one of the key skills that differentiates a good FD to an outstanding one is how prepared they are to take risks. Risk is a subjective term that can mean different things to different people. Perception of risk could be relative to your business, economic environment, your nationality, your function or your individual personality.
Is it important that you understand your personal risk profile, especially in relation to your current business?
The report gives a good indication that this is an important area for current and future Finance Directors:
- On one hand, when the survey of Directors asked whether they thought the drive for growth had made FD’s take too many risks, 60% said no to this. The report quoted FD’s as saying ‘the biggest risk of all would be to do nothing.’ FD’s saw planning for growth their number one key strategic priority at the moment.
- On the other hand, some FD’s interviewed identified that ‘too many FD’s failed to say no to their CEO’s.’
So what can you do to identify your personal risk profile?
- Where would you place yourself in order of appetite for risk in your organisation when considering individuals in your Senior Management team? How far up or down the scale are you relative to them?
- How often are you pushed across your risk comfort boundary? On what occasions?
- How prepared are you to take a risk if it affects:
– Only you?
– Your direct team?
– Your Business Unit or Division?
– The whole company?
- Can you identify a time when the business has taken a risk that you were not comfortable with? Why were you not comfortable?
- Consider when you have been intellectually in agreement with a risk, but physically you have felt uncomfortable. How could you best manage yourself in this situation?
- Consider when intellectually and physically you have not been in agreement with a risk. Identify an effective way of how you could have influenced an alternative plan of action.
Understanding your own risk profile gives you clearer insights as to where your personal limits are and how you could potentially react when faced with risk. Take this opportunity to identify some strategies for dealing with risk.