Risk stakeholder personality traits and risk decision making: a financial services case study

Abstract

Constructive critical discussion of risk issues between risk stakeholders should improve the quality of business decisions. This is one of the reasons why most financial organisations employ risk managers to assist business in such decisions. Role differences between risk managers and business decision makers in the decision making processes can be expected to attract people with role-compatible characteristics and personality types. Related personality-based differences in approach to risk-related questions should add to the quality of business decisions. This exploratory study investigated whether the typical personality traits and risk decision making propensity of risk managers and business decision makers differ in the personal wealth management division of a large financial services organisation. A three-phased mixed-method exploratory research approach was used to investigate this question. The first phase consisted of 10 semi-structured one-on-one interviews with risk stakeholders at management level in the organisation. The aim of the interviews was to gain an understanding of conflict situations that arose due to risk decision taken. In the second phase, this information was used to design and develop seven scenario-based risk decision making vignettes. In the third phase, a. sample of 138 risk managers and decision makers completed the HEXACO PI-R 60-item personality inventory and the risk decision making vignettes. The application of scenario-based risk decision making vignettes to study risk stakeholder decisions is new to the financial sector. Despite our initial expectations, the personality traits and risk decision making propensity did not significantly differ between the risk and decision making groups. This result indicates that unfounded expectations of difference in approach between risk role-players may give management a false sense of comfort that risk managers are effectively challenging risk decisions taken by business decision makers. The research findings have implications for risk management and recruitment practices for organisations that rely on risk managers making a valuable contribution to business decisions.