As discussed in the last post, corporate, organizational and personal risk profiles are dynamic and situational. Dynamic in that they change often. By the nature of organizations having a more gradual decision-making process than individuals, their risk profile change less often. Individuals, on the other hand, may change their risk-profile much more often based on successes, set-backs, access to capital, financial security – or lack of it – and countless other variables.
A Reuters article today on the British banking system makes the comment that there is a “tendency for banks to become overly risk-seeking in an upswing and risk-averse in a downswing.”
This is accurate and affirms both that risk-inclination is situational and organizational decision-making is often gradual. Call it the risk overhang, which can lead to the risk hangover. It is a function of excess. Excessive risk-inclination during the upswings. Excessive risk-aversion during the downswings. A risk posture that is no longer in alignment with the business and economic environment. It overhangs the change in conditions.
It is all a matter of balance – or lack of it. A successful risk posture always is.
