Musings from the CU Suite

Written by Anthony Demangone

Risk, and how people manage it, fascinates me. 

There is risk in everything we do. Driving to work. What we eat. And there is risk in what we choose not to do. 

Every decision we make manages or shifts risk in a way that makes sense to us. 

While no two people view risk the same way, a Harvard Business Review article really did a nice job of dividing the world into two camps. 

Camp one has a "prevention" focus. Their goal is to maintain the status quo and have things run smoothly. They are more deliberate in decision-making, seeking to minimize possible losses or mistakes.

Camp two has a "promotion" focus. Their goal is to find opportunities to make progress and/or gains. This camp is willing to make mistakes or incur losses when the decision also holds a chance for substantial gain. 

And here was an interesting, but surprising detail. When there are problems or existing losses on the books, which camp would take a more risky bet to dig out of the mess? Believe it or not, it was the "prevention" camp. Research has shown that the desire to "return to the status quo" drives the "prevention" camp to make riskier and riskier decisions. The "promotion" camp wasn't all that interested in the status quo to begin with. So they look at each new opportunity independent of the status quo. 

Please read the article, as it does a  nice job of discussing risk and risk management. But I will leave you with a few questions.

• Are you in one camp or the other? A combination? 
• Are you in one camp for one area of your life or career, but in the other camp for a different area? For example, someone may be risk-adverse with their health. But not their investments. 
• Should your credit union have a promotion or prevention focus? Or is that too broad a question? Are there areas where one camp is more important than the other?

All right - those are enough questions for the day. Enjoy your Thursday, everyone.

- Anthony

 

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No matter which camp you may find yourself, we'd love to see you at this year's NAFCU Risk Management Seminar. It runs from August 8-10, in beautiful Denver, Colorado. Let me know if you need any additional details.