How Women Leaders Reduce Risk

As we all deal with multiple 21^st century risks – of covid variants, climate change, risks to fair voting, economic risks as the economy reopens, career risks, and the risks of more political violence – it’s important to stop and recognize that each of us defines and manages “risk” differently, based on an almost unlimited number of influences. That’s what author, TED Talk star and former think tank executive Michele Wucker says in her ground-breaking new book “You Are What You Risk: The New Art and Science of Navigating an Uncertain World.”

People diagnosed with life-threatening illnesses eschew their doctors’ advice and embark on their own disease management journey. Many brave souls risked their own death to protect Jewish people from the Nazi camps during World War II. Other people think nothing of partaking in extreme sports that would give many of us heart failure to even think about, like gold medal-winning gymnast Simone Biles pictured above. 

Mid-level managers leave a promising career in Corporate America to risk their meager lifesavings and professional reputation to launch a startup that may fail long before it can become one of the extremely rare “unicorns” that achieve massive success. Investopedia says 90% of start-ups fail over a 10-year period. (I would ask, if you made it to 10 years, is that really a failure?)

Wucker also explains that how we perceive risk is a kind of operating system underneath all our choices and decision-making, saying, “how intimately risk lies at the very core of our identities.”  She calls it our “risk fingerprint,” akin to the unique lines in our fingers, and says it’s composed of: “the combination of personality traits, experiences, and social context that is a core component of each person’s identity.”

Think about all the decisions you have made, from where to go to dinner, to whether to wear a face mask during the pandemic, what to drive and when, whether to exercise and how often, who to date or marry, where to work, what kind of career you want, where to go to school and for what, or whether you want to figure out a way to pay your bills without having to work at all.  

Then there are creative people who are taking risks all the time by creating a new play or song or clothing design or painting or television show or movie…and the list goes on because you can be creative in any field.  For every Lin-Manuel Miranda who won the MacArthur “genius” award, the Pulitzer Prize, three Tony awards, and three Grammy awards for his ground-breaking play “Hamilton,” there are hundreds, maybe thousands, of starving artists, playwrights, musicians and singers waiting tables while they try to land a breakthrough.

Danger vs. opportunity

“Why do some of us think of danger where others see opportunity?” Wucker asks. “The reasons we choose to face or ignore the dangers and opportunities in front of us may surprise as much as enlighten. So many things shape how we perceive and rank risks: demographics, upbringing, career choices, religion, geography, culture, past experiences, generations, media, decision processes, organizational design….the list goes on,” she adds. And then surprises us by stating that “your height, what you look like, what you are today, what language you speak, and what music you listen to – play a bigger role than you might think.”

You might say, “not me, I’m an engineer or an executive who is totally rational.” Wucker says, “Even people who consider themselves to be highly rational are buffeted by emotions, cognitive biases, and the rush of hormones through our veins…These often unconscious influences shape how sensitive we are to risks: that is, how likely we are to judge something as risky or not.”

Men and women and risk

Since how we see and manage risk is a function of our demographics, experiences and social context, men and women do so differently. On a basic level, men can go running alone at night, for example, with limited risk, whereas a woman doing so may be risking being attacked.  

But it happens in business too. Women start businesses based on their skills, contacts and ideas, just as men do. Yet, even though women-owned businesses earn a whopping 63% higher return on investment than male-only founded firms, according to First Round Capital and Shelly Porges, Co-Founder and Managing Partner of the Billion Dollar Fund for Women, as I wrote in Forbes last year, women-owned businesses struggle to secure investor funding. Only a paltry 2.3% of venture capital funding in 2020 went to female-founded firms, according to the Harvard Business Review (Pitchbook reported it was 2.8% in 2019, an “all-time high”).

Why so little? Because, despite the evidence, male investors – and even many female investors – perceive women as a greater risk as a founder. 

In truth, women weigh factors more thoroughly, are more prepared, and “it’s time to pay attention to the clear and growing body of evidence that women are better at managing risk,” Wucker writes.

She quotes tons of research throughout the book, including a study by Q McCallum, a U.S.-based data science consultant who “found that women are more likely than men to seek outside expert advice on areas outside of their expertise as a smart risk-mitigation strategy to head off both known and unknown dangers.” And that, McCallum says, is the key.

“(W)hen it comes to gender differences in approaching risk, that’s the biggest one I’ve seen: men are more likely to pretend that problems simply will not occur.”

Since leadership is about managing risk responsibly and well, this is yet another reason that the best “man” for the job is a woman.

Watch for my upcoming interview with Michele Wucker on my podcast, which is being rebranded and relaunched shortly.