AbstractThe current growth in interest in risk management is well documented in management and governance literature alike, reflecting the increasing needs of organisations to protect people, assets and shareholder funds. There are many reasons cited for the growth in risk management and this research work addresses three drivers in particular, which it is argued, have given rise to a need to revisit the basic building blocks of understanding for how people address business risk.
A significant work cited in this research and the element that contributes to its title is the increased pace of life, which in an industrialized context was labelled 'clockspeed' by the MIT Professor Charles Fine in his 1998 book. In an organisational context, letters taking days have been replaced by email attachments taking seconds. Production lines of people crafting product parts have in many areas been replaced by fast complex machines turning out much more than the workforce ever could for the same cost. The time from design to product has reduced, even for complex products. Charles Fine recognised two qualities in this increasing clockspeed world that he described in his work. Competitive advantage is transitory; nobody can afford to stand still and secondly, that the slower clockspeed industries could learn from the faster ones.
Collectively, the drivers of increased complexity, reduced resource levels and increased clockspeed have led to a unique situation of requiring good risk judgement, delivered around complex decisions, with incomplete information and often within a limited time constraint. While the concept of risk has a long history, it has only been since the 1960's that significant research into how people react to risk has taken place.
Seminal work from the 1960s, 1970s and 1980s into the psychology of humans still holds good and has relevance today to explain the behaviour of people called to manage risk in the workplace. With this research work, we go back to this work as the starting point and pick up on equally relevant work since that time to bring greater understanding to a very modern problem in risk management. The justification for this approach is in recognition that often people are able to manage risk very effectively and the scenarios of driving cars on today‘s busy roads are used to illustrate this very point. This apparent success in real time risk management is in contrast to the development of risk management as a discipline, characterised in this work through the recently published standards, which describe a process which assumes time is on the side of the decision maker. As part of the problem description, this fallacy is raised and the argument posed that the drivers of complexity, falling resource availability and increasing industrial clockspeed means that more than ever, people will need to rely on 'affective' (using the psychological meaning) based risk management to support their decision making.
By revisiting the vast body of psychological, organisational management and risk management literature that now exists, two models were drawn to reflect the two modes of managing risk that align to the two dominant modes for decision making known as the 'dual processing' theories. While these models can stand on the body of literature, the application and thinking that emerged as 'risk clockspeed' depends on a greater understanding of how people use these two modes of decision making. For this reason a mixed method approach was used, consisting of simulation, a case study and a survey to unpick the basic elements of risk clockspeed thinking. The validity of the models was also tested around the three perspectives that appeared to be important in supporting the decision making process. The three elements tested being experience, competency and expectation which it is argued need to be considered and fostered if a good 'affective' response to risk is to be used as a legitimate tool of management.
In conclusion, findings suggest that affective decision making can be a valid and effective method of risk management in many situations. It was also found that the 'mental models' that people use both on their own and collectively as a team are important and the three perspectives of experience, competency and expectation are widely used by a range of people in different roles when making real time risk carrying decisions.
The value of the models is explored as a tool of management, but the scope of the work was not extended to testing the models within the workplace, although this is now happening in practice as the work is both published and cited.
In closing, it is recognised that this is not the final word on 'risk clockspeed' and the thesis raises further questions that need to be picked up and addressed if risk clockspeed' is to become a main stream approach in risk management. The author of this work plans to continue to research and publish in this field and it is hoped that other researchers will also take up this domain for their research.
|Date of Award||Dec 2011|
|Supervisor||Edward Peter Borodzicz (Supervisor)|