A new perspective on women and risk

There is a bundle of academic research showing that women tend to be more risk averse than men. In business, this plays out in a number of ways. 

As investors, for instance, women tend to be more cautious than men. This can be a bad thing – investors unwilling to make big bets often will not see high returns, but in a wobbly market like that of the past decade, taking greater care might be advantageous.

Several studies have also shown a connection between profit, gender and leadership. According to one such study, companies with several high-ranking women tend to have higher stock prices, earnings per share and return on equity than rivals with few or no senior women. Another shows that female chief executives and company directors tend to pay a lower premium in corporate takeovers, which saves their shareholders a great deal of money.

A study published earlier this month by professors at Columbia Business School in Current Directions in Psychological Science, a journal of the Association for Psychological Science, adds to the body of research. It looks at people’s propensity for risk taking and how it affects their professional lives.

This is important because, as Elke Weber, co-author of the study, told me recently: “By and large, it’s still true that in most corporate cultures a certain level of risk taking is required to get to the top level of an organisation.”

The study’s findings challenge the assumption that women take fewer risks than men. While men are willing to take more risks in finance, it reports, women are apt to take more social and professional risks, such as starting a new career in their mid-30s or addressing an unpopular issue in a meeting at work. This is because they perceive risk differently.

“It seems as though familiarity breeds a reduction in our perception of risk. It has to do with our exposure to certain situations, and whether we concentrate on the potential downside or potential upside – whether the risk excites us or makes us anxious,” says Weber.

“If you have more experience with a risky situation, you may perceive it to be not as risky. Starting a new career may feel familiar to women because they are – generally speaking – naturally good at multitasking. They’re used to juggling.

“Raising an unpopular point in a meeting may also feels familiar because in social and work situations, women feel they can take the lead as a mediator. They are used to being problem solvers in this context.”

Weber, who is the co-director of the Center for Decision Sciences and professor of management at Columbia, says the findings have implications both for companies striving to put more women in senior management roles and for women who are climbing the corporate ladder.

“It’s very important to make minority members of an office [such as women] feel comfortable in their work environment. Companies need to look at their culture and ask: does it give people the feeling that they are accepted? Are employees getting exposure to different kinds of situations?” she says.

“For women, the takeaway is about listening to their emotional voice that might be making them shy away from certain types of risks and opportunities. Women also need to try to get vicarious experience of risk taking, either by reading literature that expands their range of experience or speaking with mentors and people in their network.

“They need to ask themselves: is my fear justified? Or is it a residue of past experience?”


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