Skip navigation Scroll to top
Scroll to top

The meaning of risk

19 November 2015

John Armstrong

At a recent event, we discussed the subject of ‘Risk’. What were the biggest risks we had taken? What does risk mean to us and to our clients? Is there a difference between the perception of risk and the reality of risk?

We were looking to provoke a deeper discussion on the subject, questioning the notion of the industry’s risk categories. Such as how can there only be one solution for a medium risk client?

It was clear that we each had a different view, and took a different approach to risk in our lives. It is these individual nuances and emotions that we as wealth managers need to take the time to fully understand.

As part of ‘A Portfolio of Thoughts’, our partnership with The School of Life, we worked with Robert Rowland Smith on an essay exploring ‘Risk’ and have shared some key thoughts from this below.

Real versus perceived risk

The home is the riskiest place you can be. From falling down the stairs, to slipping in the shower, to cutting your finger while you are chopping vegetables. But ask most people what they consider to be the riskiest things to do, and being at home most likely won’t be mentioned. It is a fact that brings perception and reality into conflict. We perceive high risks where they are low (taking a flight), and low risks where they are high (taking a shower – so easy to slip).

And whether we are accurate or not, our perception of risk has been on the increase. From the global level of climate change to the political level of terrorism, we as a culture have become more sensitised to risk than ever before. Think of the health and safety culture, the cult of transparency, and endless risk registers.

The joy of risk

So perhaps it is time to make a change in the opposite direction, and get to know again the joy of risk. We know from phenomena like Fifty Shades of Grey that we are attracted to tempting the boundaries, and in any case most of us take wonderful risks without necessarily realising that is what they are. Falling in love is to risk your heart, but most of us do it at least once. And many of us also take the trusting risk of turning love into marriage. Risk makes the world go round, and of course we know that there would be no enterprise or innovation without someone somewhere having gone out on a limb. History remembers the risk takers, not those who stayed at home – and merely ended up slipping in the shower.

To read the essay in full, please click here.