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?”


This blog is no longer updated but it remains open as an archive.

The 'Women at the Top' blog is part of a series of online and print publications that focuses on women's achievements in business. With up-to-date news and incisive analysis, the blog will provoke discussion on the role of the world's most prominent businesswomen. www.ft.com/womenblog

For more Women at the Top news, video interviews and other features, visit www.ft.com/womenatthetop


About our bloggers

Liz Bolshaw

Liz Bolshaw is a business journalist and editor. She has been a successful book publisher, online editor, magazine editor and publisher.

She was launch editor of the Europe-wide online community Entrepreneur Country, has published magazines for PwC, 3i, dunhill and Bafta, and launched The Sharp Edge, a magazine for and about entrepreneurs, with Duncan Bannatyne. She is a regular contributor to Thomson Reuters’ Venture Capital Journal.

Her last project for the Financial Times was as editor of the paper’s Business Education magazine.

Rebecca Knight

Rebecca Knight is a freelance journalist based in Boston. She writes regularly for the FT on business education, entrepreneurship, and management.

Andrew Hill

Andrew Hill is an associate editor and the management editor of the FT. He was City editor of the FT and editor of the daily Lombard column on British business and finance from September 2006 to December 2010.

He was the FT’s financial editor from June 2005 to September 2006, with overall responsibility for coverage of companies and markets. Before becoming financial editor, he was the FT’s comment & analysis editor, in charge of the paper’s opinion and features pages.

From 1999 to 2003, he was the FT’s New York bureau chief. He joined the FT in 1988 and has also worked as foreign news editor, UK companies reporter and correspondent in Brussels and Milan.

Pino Bethencourt

Pino Bethencourt is a professor and leadership expert at IE Business School in Madrid. She is also an author and executive coach.

Lynda Gratton

Lynda Gratton is professor of management practice at London Business School.

Linda Tarr-Whelan

Linda Tarr-Whelan, former ambassador to the UN commission on the status of women, is a Demos distinguished senior fellow.