COLM FITZGERALD is
an assistant professor of actuarial science at University College Dublin.
DR JONATHAN ALLENBY is a senior
DR MONIKA SMATRALOVA is a head
actuarial analytics consultant at EY
of supervisory review and evaluation process, group risk, at permanent tsb
Assessing and managing behavioural risk One method of assessing behavioural risk is the ‘know yourself test’. This is an actuarial method to measure the degree of distortion in a person’s ego that might be considered an indication of the level of their behavioural risk. The test works in the following way: ● Egos can be assessed because we are mostly unaware of our own. Otherwise the distortions would not have the desired effect. The test’s methodology uses a person’s ego against itself in order to reduce gaming. ● Different psychological perspectives are assumed to be associated with different positions of the hill. ● An individual’s position on the hill is assessed according to the extent to which they hold certain different perspectives. Forty such perspectives are the basis of the questions in the test. Answers to these questions are scored to quantitatively assess the extent to which a person is reaching ‘full-humanness’. Four coefficients are output from the test, indicating (1) where the person is on the hill, (2) the quality of their logical and rational thinking, differentiating between rationality and pseudodoxia (distorted logic), (3) the degree to which they put thought into their work, and (4) the degree to which the person is behaving merely prudently or in a superiorly prudent manner. The overall methodology has been tested in focus groups and trialled to enable statistical testing of the results. These indicate moderate-to-strong levels of reliability and validity. Feedback is also provided by the test to indicate the changes in perspective that can help a person reach their full potential through achieving better levels of selfrealisation. A number of companies have recently begun using the test as a tool for assessing and managing behavioural risk, as part of initiatives to improve their business performance.
Assessing and managing culture risk Individual dispositions towards decisionmaking and action do not exist in a vacuum. They are also shaped by social culture, background and, critically, by organisational culture. At the board level, organisational culture is readily identified with the mission statements, aspirational corporate values and initiatives that are pushed out through the architecture of the official organisational chart. At ground level, culture is constituted CRISTIANO SIQUEIRA
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by implicit norms of behaviour, habitual patterns of communication and shared values within various groups. These values are often articulated through a shared stock of common stories about the behaviour of well-known people. Such cultural aspects may significantly reshape the ego-behaviour of people compared with their lives outside work, often making them less focused on positive outcomes and more subservient to rules and principles. In addressing cultural issues, organisations commonly use one-size-fits-all initiatives, targeted at people based on their official position within business units and employment grades. However, effective cultural interventions require a proper understanding of how teams operate in practice, the roles people play in their informal networks and the values driving behaviours within and between teams. While quality of leadership, effective team working, open communication, diversity of mind and individual engagement are common themes to be pursued in improving organisational culture, the specific balance to be achieved, and the current state to be addressed, will vary significantly, even within a single organisation. In order to get a solid understanding of where communication, collaboration and decision-making is working well or breaking down in an organisation, it is useful to map both the structure of common interactions, using techniques such as social network analysis, and to profile the values that drive those interactions. One method currently being used to assess the impact of culture on the ego-behaviour of individuals within teams is the ‘know your team test’. It assesses the degree of health in the team ego and compares that with the average health of the team members’ egos. The methodology is similar to that of the ‘know yourself test’, using the team ego against itself to reduce gaming. It can highlight behaviours of the team members that are likely to be adding to or taking away from the team’s culture and also enables some quantification of dominance risk, this being one of the key elements of culture risk. Finally, the test proposes specific selfrealisation suggestions for team members and other remedial actions to improve the progressive nature of the team’s culture. The research that led to the creation of the two tests described above was funded by the Society of Actuaries in Ireland and illustrates the role actuaries can play in managing these important risks. October 2016 • THE ACTUARY 19 www.theactuary.com
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