Leading Diversity in Risk
Diversity, in all forms, enriches business beyond just reputational benefits. Tied with an increased bottom line, companies championing diversity dominate their gender-homogeneous counterparts by 85% percent when looking at financial return and 50% when considering performance, according to a recent PwC survey.
Research by McKinsey mimics PwC’s findings, reporting that “companies in the top quartile for gender or racial and ethnic diversity are more likely to have financial returns above their national industry medians”. These diverse teams operate with open, constructive debate a fundamental and understand why the status quo sometimes needs challenging.
Unfortunately, Risk Management teams are yet to fully embrace diversity and the ripple of benefits it brings. With women only accounting for twenty-five in every hundred Risk Management Executives, diversity in thought is instead replaced by grey groupthink that subconsciously, or consciously, normalises inherent biases.
A major influence of this lack in diversity stems from employers mimicking their current employee profiles when hiring. As recruiters consider CVs, subconscious bias is often at play with recruiters drawn to applications that reflect their personal or current team’s background. Companies tend to consider candidates who look, sound and operate the same as their current team.
Yet, this hiring trend is especially ignorant within Risk Management, which needs a 360-degree perspective. Risk Management teams need to be open to challenge which is best achieved when teams are rich with varied thought, skills and ideas from broad talent profiles. Research conducted by the University of Michigan saw these diverse teams better able to solve problems in comparison to homogeneous teams, who objectively were best skilled to solve the problems on paper.
Another study expanded on the risk-taking approach of men and women comparatively. It found that whilst men are driven by the “winner effect”, women focus on long-term trends. And where men are drawn to monetary gains, women look beyond financial to other factors or outcomes when considering risk. This study linked testosterone with an “over-optimism about future changes in asset values” and found success closely tied to gender balance and age diversity.
When teams are balanced, no perspectives are neglected. Beyond gender, risk teams should be multi-dimensional and intersectional. Consideration of age, ethnicity, tenure within the risk department and beyond feed into the team’s diversity.
This diversity in Risk Management teams should be continually re-evaluated, particularly when hiring. Grooming from the bottom-up is a good approach for this hiring. Companies should consider infusing diversity in middle management as a long-term approach to achieving diversity in senior management.
One final consideration – diversity needs to be balanced with cohesion. When forming diverse teams, leadership need to consider strategies to ensure these diverse employees effectively work together.