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The 7 characteristics of an Explorer Mindset – #2 Risk Tolerance

Jay Samit, the dynamic entrepreneur and intrepreneur who is widely recognised as one of the world’s leading experts on disruption and innovation said, “If I had known ahead of time all the problems I would face on the journey, I never would have started”

Failure is hard, it can lead us to feel emotionally low, disappointed in ourselves and even question our identity as a person. Yet anyone who has successfully innovated, especially serial innovators, will tell you that failure is an essential ingredient of transformation.

Some people are naturally less worried about failure, their environment growing up resulted in them being less preoccupied by risk. This means that they tend to invest less time and personal energy anticipating problems in any given scenario. When faced with decisions, they tend to be less motivated than most to avoid failure, instead they are motivated by other things, such as maximising the gain in any situation.

What is Risk Tolerance?

Your risk tolerance is an aspect of your mindset that determines how much mental resource you invest into anticipating and avoiding failure. If you have a low risk tolerance, this can mean that you are less likely to take on projects that you deem risky, no matter what the potential rewards could be.

Why is it important?

Decision making
If you want to lead change or innovation it is important to know what your risk tolerance is. This self-awareness enables you to challenge your own mindset.

  • Is your fear of failure holding you back?
  • Are you paying enough attention to risk and what could go wrong?

As a leader your communication is highly influential. Whether you are aware of it or not, what you say will prime others to see things the way you do. Therefore, it is important to be mindful of how your personal risk tolerance could be influencing the attitude to risk of those around you.

Diversity of thought
Through greater insight into the risk tolerance of yourself and your team, you can ensure that you minimise blind spots in yours and others’ thinking and cultivate the mindset that is helpful for the task at hand.

What does Risk Tolerance look like?

Leaders with high risk tolerance tend to:

  • Be more willing to take risks
  • Be more focused on exploring situations and opportunities than avoiding any risks that you see.
  • Have a high tolerance for working towards something when the outcome is uncertain.
  • Not motivated by maintaining the status quo.

Leaders with low risk tolerance tend to:

  • See problems that others don’t see.
  • Find that risk causes them significant worry.
  • Invest significant time in avoiding errors.
  • Will nearly always choose the path that is lower in risk, without giving too much consideration to the upside potential.

How can leaders build Risk Tolerance?

Our Explorer Mindset Programme addresses Risk Tolerance on many levels, including:

  • Change Simulation with Adam Billing
  • Managing Innovation in Conditions of Uncertainty, with Tim Minshall, Churchill College Fellow, Professor of Innovation, and Head of the Institute for Manufacturing, University of Cambridge
  • Strategy, competitiveness and complexity with Sudhanshu Palsule

Risk tolerance is also focused on and developed during the inter-modular project and inter-modular coaching.

This is the second of seven insights in which we will briefly cover the other six characteristics of an Explorer Mindset including:

  • Preparedness
  • Leading Innovation
  • Ambiguity Tolerance
  • Approach Orientation
  • Personal Resilence
  • Perspective Taking

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