risk-curve

Risk tolerance can be visualized as a curve. Above the curve represents a combination of high probability and a potential negative impact that will prevent the team from accepting the risk. Below the curve, the risk is deemed acceptable.  Outside of a few psychologically damaged individuals, everyone has a risk curve (whether they know it or not). On a team, everyone’s natural risk tolerance differs.  Complicating the discussion is that risk tolerance changes depending on context the person or team faces.  For example, at one point in my life riding my bike down a hill at top speed to see if I could slalom stop at the bottom was an acceptable risk.  I have the scars to prove I was that silly. Thinking back, I am not sure why I am alive today.  My risk tolerance is different now. While reminiscing about my unsafe days as a seven-year-old is fun, what is more important is to recognize that the same lesson can be applied to teams and in organizations. This leads us to the conclusion that we must talk about risk tolerance.   (more…)