MRID APPROACH

Many people make decisions without taking any account of risk, driven by gut-level preferences that they neither understand nor recognise. While this may be fine for simple decisions, a more risk-aware approach is required for risky and important decisions. We call this a Risk-Intelligent Decision.

• Before making a Risk-Intelligent Decision, you need to understand both the decision information (objectives, context and options), and the decision-makers (especially their individual risk preferences, shared risk culture, and commitment to action).
• To make a Risk-Intelligent Decision, you need to know the level of risk associated with each decision option. This is driven by risk perception, which may not be reliable.
• You also need to know how much risk is tolerable. This requires you to understand your risk appetite and express it in measurable risk thresholds, then choose a decision option that lies within the thresholds.
• If no decision option falls below risk thresholds, it’s possible to choose a different risk attitude and modify thresholds accordingly.

Risk perception lies at the heart of a Risk-Intelligent Decision.

• You can’t “know” how risky something is – it’s based on your perception of the level of risk. But risk perception is influenced by many factors, and it may not be a reliable indicator of riskiness.
• The “triple strand” groups influences on risk perception into three categories: conscious (situational assessments), subconscious (heuristics and cognitive biases), and affective (gut-level feelings and emotions). You need to understand these before you can take account of them.
• The triple strand of influences impact individuals and groups.
• Each strand needs to be understood so you can unpick the combined effect.

People make risky and important decisions, so you need to have competent individuals and a functioning group in order to make a good decision.

• Individual competence is made up from the five PEAKS elements: Personal Characteristics, Experience, Attitudes, Knowledge, and Skills. Competent decision-making requires a distinct set of attributes within each of these five elements.
• Functioning groups need to take account of factors that can otherwise skew rational decision-making, including propinquity, power, group dynamics, team maturity, leadership style, and organisational culture.
• As leader, you may need to work with individuals in your team who have limited competence, and some aspects of group behaviour may also need your attention.

To make a good risky and important decision, you may need to address or modify several invisible and inherent factors, including changing risk attitude, correcting for sources of bias, or moderating emotions and feelings. Behavioural literacy provides a way to understand and manage hidden influences.

• The Seven As Framework offers a structured approach to behavioural literacy, starting with Awareness, Appreciation and Assessment. This may lead to Acceptance of the status quo, or Assertion and Action may be needed. Either way, the framework includes Appraisal, to check whether anything significant has changed.
• You should practise behavioural literacy for yourself first, before leading others towards improved understanding and management of their own internal drivers.

Risky and important decision-making is significantly complex. It’s vital to expose information that is complete enough to support the ‘weight’ of the decision and a risk culture that can understand and modify hidden influences. It is your responsibility to shape a risk culture where attitudes and behaviours support decision-making,

• Four aspects of behaviour are essential for shaping a mature risk culture: how you communicate, how you enable information-sharing, how you support people, how you recognise and reward risk-taking.
• As a leader and role model in your organisation, you have a direct impact on the ability of your team to understand risk, to speak about it with confidence and to appreciate how their perceptions and those of others might be biased.