The Twentieth Century started with euphoria of new wealth, relative peace, and industrialization; only to descend into a chaos of worldwide wars and some of the worst economic crises. These and other catastrophes crushed illusions about the perfectibility of society and our species, leaving us less idealistic and more appreciative of the continuing uncertainty of our future.
What started as a production based economy, at the end of the century has transformed into service economy further leading to information and risk economy. In later case there was no value creation whatsoever. It was entirely based on the buying and selling of risk, a pure abstraction unconnected to any real capital activity.
Over the last few decades world has been obsessed with achieving high growth, since growth was associated with development and the eradication of poverty. But there was no clear realization that high growth can be achieved only at high risk.
In recent years competition in market has been tougher than ever. Three supply-side forces – Globalization, Technology development and economic liberalization – unleashed innovation and increased productivity and GDP on a scale never seen before. But the current economic crisis has brought this to a halt. Nations and corporate world are facing increasingly uncomfortable reality, that the continuity of growth is anything but uniform or predictable.
As intensity of product market competition increases (as a result of greater product substitutability or greater market size), managers are provided with increased incentive to reduce costs. At the same time, more intense competition also leads to more volatile firm-level profits. Consequently, managers’ incentives are positively correlated with firm-level risk.
This has made Risk management a central part of any organization’s strategic management. It is the process whereby organizations methodically address the risks attaching to their activities with the goal of achieving sustained benefit within each activity and across the portfolio of all activities. The focus of good risk management is the identification and treatment of these risks. Its objective is to add maximum sustainable value to all the activities of the organization. It marshals the understanding of the potential upside and downside of all those factors which can affect the organization. It increases the probability of success, and reduces both the probability of failure and the uncertainty of achieving the organization’s overall objectives. Risk management should be a continuous and developing process which runs throughout the organization’s strategy and the implementation of that strategy.
Who does it best?
Various research initiatives and surveys in essence conclude that effective risk management seems to be related to following guidelines but using one’s own initiative throughout the process and using the analytical skills that form part of achievement thinking. Those managers who rely upon the conventional thinking process based totally on rules and procedures are more likely to accept a proposal that meets the textbook criteria, but fail to identify other factors that might impact on the risk quality.
The cultures of organization also plays very important role in successful risk management Managers rated highly on risk management capability are more likely to encourage employees to behave in constructive ways, focusing on where their effort could make adifference, supporting each other and solving problems in creative ways.
Survival of the fittest
The differences in the way humans have lived for most of their existence have created variations in the traits of the two sexes. For almost ninety percent of the timeline they have lived as hunters-gatherers. To be effective hunters, men needed to be quiet and work alone. This conditioned them to work independently and be more competitive as compared to women. Women, on the other hand, acted as social fabric of primitive community. They developed skills and instincts to be effective at relationships and building a close knit family. A look at composition of prison-population gives clear idea of which sex has more problems in adapting with the society.
Gender vs. Traits
Various studies and researches have confirmed that those instincts and skills are being displayed by the two sexes even at present. Men tend to be tough decision makers, risk takers, and more competitive and analytical as compared to women. Women, on the other hand, tend to be risk averse, collaborative, participative, leading towards transformation, adapting, and more likely to delegate and reward people.
Striking ‘the’ Balance
As pointed out earlier, managers who are more collaborative, participative and risk averse tend be better at managing risk. Women being risk averse tend to make safer decisions to start with and subsequently keep a constant focus on risk management. But, for prospects of growth certain amount of risk has to be taken; without risk it is next to impossible to imagine any form of entrepreneurship. Hence, we can safely conclude that on an average a management team consisting of any single gender will not be as effective at balancing growth and risk as a team having significant representation from both the genders. This calls for increased women participation in order to have a blend of risk takers and risk managers.
Change is the only constant
Apart from the skill based need of women participation for better management, recently there have been many changes in business environment which indicate benefits in general through increased women participation. With women empowerment turning into a really in world population as a whole, the number and purchasing power of women is bound to increase. Having, increased woman in the higher management will mean a better customer understanding at decision making level, which is critical to success of any business. Hermes – the only French firm to record share price growth in 2008 has majority of its clientele comprised of woman. It may not be mere coincidence that its majority of management is also women.
Increased woman participation also has potential to take a growth route through value addition to society. Besides, adding value to society, women empowerment results in increased women customers which can potentially give birth to a positive growth cycle.
Diversity vs. Meritocracy
It is a given that selection process should be free of any biases in culture and sexes. But is certain amount of diversity required even if at the cost of meritocracy? In the situations where there’s not enough representation of women in a team, adding a women member may bring more gain through diversity than the cost associated with the meritocracy of preferring women for such teams.
In order to manage the increased risk properly we need to build teams which are passionate about both taking and managing risk. Hence, consideration of increased women participation in the managerial teams becomes crucial!