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Behavioural risks could put companies in jeopardy

11 October 2013 by Alexandra Jones

Behavioural risks, such as narcissism or hubristic attitudes of senior management, could be putting companies in jeopardy as the latest study warns few boards adequately review these dangers.

The research, conducted by board advisory firm MWM Consulting, concluded that boards find it hard to deal with long-term leaders who, as a result of their power, may be endangering the future of the company.

 

MWM warns that Boards often lack the focus, the tools and the confidence to address such business leaders.

 

Companies are urged to take urgent steps to monitor and review management behaviour following interviews with over 80 Chairmen, CEOs and experienced Board Directors of large UK and international corporations.

 

The study identified seven potential ‘deadly sins’ of behavioural risk:

 

- Grandiosity and greed
- Over-concern with public profile
- 'Hub and spoke' leadership style
- Over-management of the Board
- Absence of contrary voices
- Disdain for succession planning
- Distorted thinking and decision-making

 

Michael Reyner, Managing Partner at MWM and co-author of the report, said: ‘We have established that the risk of CEOs falling prey to behavioural distortions is a real and common one that can have a disastrous effect on the business.

 

‘Such CEOs are often very high profile, both internally and externally, and this creates barriers to addressing dysfunctional behaviour. These barriers include awareness - simply being mindful of behavioural risk is important - but in addition Boards need to have the confidence to deal with a potential issue and the courage to tackle any problem in a timely way.

 

‘It is vital that behavioural risk becomes an explicit part of the Board agenda, routinely discussed both so that issues can be identified and explored before they become major issues and so that CEOs do not interpret anything sinister in such discussions, rather recognising them merely as part of good governance.’

 

The report can be viewed here: www.mwmconsulting.com/wp-content/uploads/2012/07/Electronic-version-Behavioural-Risks.pdf

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