What Is Your Personal Risk Tolerance?

July 15, 2020
Here, we discuss decision-making about social interactions during COVID-19 as restrictions are loosened and individuals have very clear differences in personal risk tolerances.

At Brown Brothers Harriman, we are often in conversations with our clients about portfolio risk parameters. These days, we find ourselves in very different discussions with our clients and colleagues around personal and physical risks. As states begin to relax many of their restrictions on businesses and large gatherings while maintaining cautionary guidelines on masks and physical distancing, many of us find ourselves in complicated decisions about how quickly and how much to return to our former routines, socializing and work environments.

We all have varying comfort around risks of many kinds – some of us drive fast, skydive, heli-ski, fly small planes, don’t wear seat belts or love taking physical risks. Others find comfort and safety in following the rules and minimizing potential risks where they can. Additionally, some of us have a very low tolerance for frustration or the need for control that is challenged daily in this time. Psychologists suggest that most of us have arrived at our personal risk tolerance for valid reasons based on our life experiences and temperament. Therefore, one’s individual sweet spot for risk tolerance or risk adversity is deeply personal. It is important in these times that we respect that in ourselves and others. We also understand that one’s risk temperament is relative. What feels frightening to you might not to your employee, business partner or vendor. It’s not just that some people are more comfortable with risk; it’s that they may not perceive certain actions as risky at all.

In this time of both increasingly less restrictions and very clear differences in personal risk tolerances, we can find ourselves at odds with family members and friends – and confused ourselves. How then, as the rules are less clear, do we handle these tricky situations? We have a few suggestions:

  • Consider your personal circumstances and self-care protocols. Decide what will make you feel safe and comfortable. Try to be as specific as you can. We all know our own and our close family’s medical vulnerabilities – our decisions need to be grounded in those facts. Are there certain people or families that you are comfortable socializing with based on similar lifestyles during this time? Consider social and business circumstances that will likely arise in the coming weeks and reflect on your comfort participating at various levels in those. Be true to yourself. Respect the decisions of others.
  • Set clear boundaries and policies. Now that you know some of the anticipated social and business opportunities, and you have reflected on your comfort or discomfort, it’s time to make informed choices. Make decisions about what you will do and what you will not do. No business trips? No indoor dinner parties? No hugging or shaking hands? No hotels? Or yes to some or all of these? Whatever it is, make those decisions before the opportunities present themselves.
  • Decide how you will decide. For unanticipated opportunities and requests, decide now how you will make decisions on where to go and what to attend and with whom. Establishing a simple framework today with a cool head and the benefit of objectivity will pay dividends. If there is someone with whom you regularly make these decisions, work on the framework together now so you are aligned if and when you are put on the spot later.
  • Communicate.  Develop a repeatable reply to family, colleagues and friends in response to requests and invitations (or pressure) from others, that is clear and succinct. You need not feel or sound apologetic. Just be clear. Also, if you are the host, be specific in your invitation about how the social event will be handled – will it be outdoors? Socially distanced? Masks worn? Large group? Be clear so that your guests can make choices and avoid surprises. Before hugging or shaking hands, ask.
  • Appreciate the changing landscape and differences. You may have more comfort with physical connection and proximity than others; nonetheless, practice respect. If you are an employer or manager, do not make your employees disclose anxieties or compromised immunity to justify declining a meeting, a handshake or invitation. Re-evaluate the situation every two to three weeks, but not more often, so that you have a policy that is consistent.
Whether you voluntarily jump out of planes or leave your seat belt buckled even in the parking lot, your personal risk tolerance is rooted in millions of inputs over the years that are incredibly personal. The same is true for your friends and family. Now is not the time to expect people to reimagine themselves in order to make you more comfortable, and vice versa. Rather, now is the time to be clear, communicative and consistent about how you plan to approach this challenging time and what others may expect of you (and not expect of you) as the world opens up.

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