So read the headline in the November 5 Wall Street Journal. The House Financial Services Committee is trying to divine a way to prevent future failures of large financial institutions while not hobbling them to the point of being ineffective.
I think we would all agree that finding that balance point is a daunting challenge. Why? Intelligent risk-taking is conditional. Whether it is a large financial institution, a small business or an individual, the appropriate risk posture at any given time is always changing. It is influenced by numerous factors including availability of capital and talent. The risk characteristics of existing organizational or personal commitments are also a factor. Market conditions and the competitive environment should and do influence risk posture. This is just the beginning of the factors that shape an appropriate risk posture.
With in being so changeable, legislating an appropriate risk threshold is exceedingly difficult. There is no way that all permutations of conditions can be addressed or even anticipated. And we haven’t even gotten to the innate discomfort with risk that may be present in some of the legislators and could profoundly influence their approach to regulating risk.
Risk is powerful and can be frightening. But we have to find a way to live with it and utilize it or we all will suffer by its suppression.
“Risk is powerful and can be frightening. But we have to find a way to live with it and utilize it or we all will suffer by its suppression.”
We do live with risk. The question is to what degree are we conscious of the matter. To what degree are we conscious of the actual risks we are taking, with the life styles we choose and the activities we pursue? To what degree do we make conscious choices about what alpine climbers like to call, “your risk profile?” Meaning, the amount of risk you will tolerate to achieve an objective. To what degree do we consciously choose to face into a risky situation because it’s the best course, versus turning away because it’s uncomfortable. Because risk is powerful and can be frightening is one reason we tend to deny it, and therefore remain largely unconscious of it. And the problem with denial and living unconsciously is that we let go of control and find ourselves suffering from things we don’t understand. It becomes undifferentiated misery.
It is ironic that in our culture society is pursuing safety, defined as the absence of risk, to the point that people often become paralyzed by fear. In fact, when positively engaged in a “risky” endeavor, defined as embracing a reasonable risk, whether jumping from a plane or taking a stretch job, people report being more happy and engaged, and consistently perform at their best.