How Your Risk Appetite Impacts Career Choices

The 2020 Netflix series The Playbook features prominent sports coaches sharing the rules they live by to achieve success. In that series, soccer coach Jill Ellis lives by the mantra “risk is opportunity” and believes your appetite for risk is a product of different experiences and values. Real payoffs can present when we leave our comfort zones.

Most organisations of reasonable size have developed a Risk Appetite Statement (RAS), which outlines their willingness to take on uncertainty and potential loss in the pursuit of profit. This can vary among different organisations, depending upon the industry they are in, their stage of growth, the experience of the management team, and so on.

The same logic can be applied in a personal career context. Our personal RAS can determine whether we pursue work in stable, larger organisations, a higher-risk start-up, or something in between. It can also influence how often we might change employers, shift career paths, the extent we are comfortable spending our careers working for wages, or taking a more entrepreneurial path.

How well we understand our personal RAS – and how it influences our career – can assist us make more intentional career decisions, align our work life with our values, and ultimately find greater satisfaction and success.

“Applying Risk Appetite is effectively saying how comfortable we are accepting the cons in exchange for the upside of the pros”

Each career decision that we make carries a list of pros and cons. Applying RAS in this setting is effectively saying how comfortable we are accepting the “cons” in exchange for the upside of the “pros”. The various risks we are considering here could include financial risk (e.g. accepting less money now with the potential of greater riches to follow), reputation risk (joining an organisation with a mixed reputation), personal risk (moving to a new country where we don’t know anybody) or social risk (working in an unpopular sector, like tobacco or gambling).

People with a low RAS will prefer security, predictability, stability and gradual growth as that comes to them. Others with a higher RAS will prefer continual change, constant new ideas, and bolder career moves. Both styles have their place, but each comes with its own consequences.

Low & High Risk Appetite Unpacked

Common traits of low-risk career paths include long tenures with the same employer, a favouring of Government or Institutional roles, linear career progression, and a preference for roles with clearly defined processes and responsibilities. High-profile or experimental projects tend to be avoided. The value set driving such a path may prioritise job security, work-life balance, and a stable income.

There are some downsides to this path. Without some exposure to new situations and ways of doing things, a “comfort zone” can easily result. American professor and author Brene Brown describes this as the place “our uncertainty, scarcity and vulnerability are minimised”. If fear of change becomes a driver, a comfort zone can over time morph into apathy and an over-abundance of “below the line” behaviours, such as blaming others for failures, denial, judgment and excuses. This can impact professional reputations and limit the potential to secure future opportunities, even if the required skill set exists.

Another unintended consequence of low-risk career paths is a prevalence of fixed mindset. In her extensive work on the subject, psychologist Carol Dweck says “People with fixed mindset believe that human abilities are simply givens. For a [person with] fixed mindset, one goal is paramount: to prove that you are among the lucky few to possess a massive amount of those fixed and precious abilities”. A low-risk career path can inadvertently leave an individual with only limited opportunities to showcase their abilities, over time contributing to a sense of frustration and even resentment toward their employer.

Contrast this with a higher-risk career path, where the over-arching drivers could include growth, purpose, or excitement. These individuals are more likely to change jobs or industries more regularly, start a new business, chase roles with elements of uncertainty attached, or actively seek a relocation where they are new to the market. To quote Dweck further, these people are more likely to possess a “growth mindset”, whereby they are “more oriented to learning….choose tasks they can learn from…..they believe that abilities can be developed”.

Intuitively, the abovementioned characteristics are more likely to promote innovation, accelerate career progression, and build diverse skill sets. However, the downsides of this could be exposure to ventures that fail, unstable income streams, or even burnout. There could also be difficulties sustaining momentum and seeing things through, especially if a more tempting opportunity materialises.

Then there’s Imposter Syndrome…..

Imposter syndrome features regularly in most discussions about career planning and progression. Put simply, it is the doubt we harness that we may not be fully ready to take on a role, and subsequently “get found out”, opening ourselves up to embarrassment and ridicule. It is not a recognised psychiatric disorder, and while most literature on it indicates it more likely to impact women, men too can experience Imposter Syndrome.

In his ReThinking podcast interview from 2022, Wharton professor Adam Grant discussed imposter syndrome with the actress Reese Witherspoon. Witherspoon said that in rehearsing for the 2005 film Walk the Line, she tried to get out of the role many times, for fear she wasn’t up to the task. It was only after speaking with close confidantes that convinced Witherspoon that the producers believed she was up to it (otherwise they wouldn’t have selected her) that she elected to persevere. Witherspoon went on to win an Oscar for this performance. Despite her many career accomplishments, Witherspoon needed to dig deep to adopt a growth mindset in this case – demonstrating how powerful imposter syndrome and growth mindset can be in influencing our career choices, whatever our risk appetite.

Self-awareness is key

Whatever your risk appetite is, you can make it work for your career by being conscious and intentional about how you manage risk. Knowing your core values is essential here – taking risks aligned with your values and longer-term goals differs from making impulsive decisions. It is also important to “own” your risk appetite and not adopt the appetite of others just to be seen to be “keeping up” from a career progression perspective. Finally, knowing the type of environment you are most likely to thrive in (e.g. supportive or individualistic), and the type of support you might need, like a mentor, can help mitigate perceived risks.

Coaching questions to ask yourself here could be: Who or what might support you to remove obstacles? What would the courageous you say you could do?

Shifts in risk appetite over time

Our career risk appetite is not static. It will shift over time. This can be influenced by life stage. For example, younger people with fewer financial responsibilities may be more likely to take the same risks as someone nearing retirement. Our self-efficacy (or belief in our ability to influence events) plays a role too. As an example, the just-announced Overall Winner of the AFR Women in Leadership Awards, Philippa Watson, refers to the “personal risk” she is taking in leaving her role as CEO of UBank to join Coaxial, a family office newly established by Nicola Forrest. Despite her love of banking, Watson said Forrest’s “decades of commercial and philanthropic experience and such a big, bold vision for making a difference, I couldn’t not seize that opportunity. I knew it would not come around again, so I made the decision to step into something really new”. With the belief gained from her past experiences in consulting and banking, and knowing her values and strengths, Watson has the self-belief to manage the risks involved in stepping out of an established role into a new venture.

Coaching questions to ask yourself here could be: What would be an option that’s beyond what you would normally consider? What advice would your future self give now? If our roles were reversed. what would you be telling me?

Strategies to help manage career risk

It is inevitable that career setbacks will occur to all of us. We might miss out on a role we thought was suitable for us, or a project runs off the rails and impacts our reputation. How we reframe failure is crucial. Dweck speaks about “the power of yet” – referring to those skills we are yet to master. It doesn’t mean that we can’t get there, but we aren’t there yet. Setbacks should be viewed as learning opportunities, not terminal moments.

In addition, our tolerance for risk can be stretched by breaking bigger challenges into smaller chunks. It can be helpful to seek advice from those performing a task at a level we’d like to aspire to, and asking what helped them along the way. In addition, a proactive feedback loop that enables us to fully understand what we are doing well, and what still requires attention can help manage our career risk.

Coaching questions to ask yourself here could be: How appealing is the next step for you? What would you like to see happen that is not happening now? What is stopping you from achieving your goal or moving forward?

Conclusion

What we have seen through this article is career-based risk is a relative term. What one perceives to be risky, another may not. There are no clear right or wrong approaches. What we do know, however, is avoidance of career stagnation is desirable, for both personal and workplace culture reasons. As humans we are attuned to learn and grow, and experience new things. Our values help determine what feels right for us at different career stages. Purposefully allocating time to critically assess our career paths with our values and life stage in mind will determine if our personal RAS is being respected, and help set us up for proactive future steps.

Lewis Williams is the Founder of Cadence Leadership Advisory, which offers leadership coaching, team leadership development services and strategy review and organisational culture support. A former banker with significant experience as a leader of people, he is a certified organisational coach, a graduate of the Australian Institute of Company Directors, and regularly facilitates development programs as Adjunct Faculty with the Australian Graduate School of Management (AGSM).