We’ve all been in that room. A major decision is on the table; a new policy, a significant investment, or a shift in departmental strategy. On the surface, everyone is looking at the same data. But beneath the surface, a completely different conversation is happening.
One person sees a “calculated move.” Another sees a “reckless gamble.”
In my work with private companies and public officials, I’ve noticed a recurring theme: Risk tolerance is almost never explicit. We treat it like common sense, assuming that because we all work for the same organization, we share the same “risk DNA.”
But the reality is that our risk tolerance is like an invisible compass, it’s guiding every move we make, but we rarely stop to check if everyone’s needle is pointing the same way and whether we even understand why our own needle is pointing a certain way.
The Research: What Happens When the Pressure is On?
A fascinating study from the University of Twente sheds light on why this matters so much. Researchers looked at the difference between a manager’s explicit risk attitude (what they say they’ll do) and their implicit attitude (their subconscious, automatic response).
The Key Finding: In their research, they found that while managers often align with company policy when things are going well, the moment a situation is framed as a “loss” or a high-pressure crisis, their explicit beliefs go out the window. They revert entirely to their hidden, implicit attitudes.
This means that in the moments when your team needs to be most aligned, they are actually most likely to drift apart, guided by individual biases they haven’t even named.
Why “Knowing the Needle” is Crucial for Decision Making
To build a truly resilient organization, we have to look at risk tolerance through three distinct lenses: the Individual, the Team, and the Organization. When these three are out of sync, decisions stall. When they are aligned, you create a “Risk Alignment Advantage.”
1. The Individual: Moving from Anxiety to Agency
At the individual level, understanding your own risk tolerance is about clarity and mental health. When you aren’t aware of your personal “risk ceiling,” high-stakes decisions feel like a source of constant, low-level anxiety.
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The Benefit: By making your own tolerance explicit, you stop second-guessing your “gut.” You can articulate why you are hesitant or why you are confident. For a public official, this means being able to defend a decision to the public with conviction. For a CEO, it means knowing when you’re pushing the company too far based on your personal ambition rather than the data.
2. The Team: The Language of Shared Expectations
Most team conflict isn’t actually about the project—it’s about a mismatch in risk perception. One person is trying to innovate; another is trying to protect the department’s reputation. Without a shared language, the innovator looks “reckless” and the protector looks “obstructionist.”
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The Benefit: When a team understands each other’s risk profiles, you move from judgment to leverage. You realize that the “cautious” team member isn’t a bottleneck but they are your quality control. The “bold” member isn’t a loose cannon but they are your growth engine. You stop arguing about the “facts” and start collaborating on the “thresholds.”
3. The Organization: Scaling with Confidence
Finally, there is the organizational level. Every organization has a “stated” risk tolerance (the manual) and a “lived” risk tolerance (the culture). If a city council says they want “innovation” but then punishes every minor pilot project that fails, the lived risk tolerance is actually zero.
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The Benefit: Aligning the organization’s explicit goals with its actual tolerance creates speed. When employees know exactly where the “guardrails” are, they don’t have to ask for permission for every move. They know what is an “acceptable fail” and what is a “catastrophic loss.” This clarity is what allows private companies to pivot quickly and public agencies to serve their communities effectively without being paralyzed by red tape.
Closing: Finding Your Frequency
Taking risks is an inherent part of leadership. But the biggest risk of all is assuming that your team is reading the same map. Successful decision-making isn’t about avoiding the “danger zone” but it’s about everyone agreeing on exactly where that zone begins.
I’m excited to be opening my Risk Tolerance Workshops for the upcoming season, specifically tailored for private sector leaders and public officials. We dive into these implicit drivers, helping your team find its shared “risk frequency” so you can move faster, build higher trust, and lead with confidence.
The most dangerous risk is the one you haven’t named yet. Is it time to make your team’s tolerance explicit?