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Risk, Speculation, and That Ol’ Gut Feeling

Brian Buck
© Scotwork NA

In today’s climate of uncertainty, we’re taking on more risk than ever before at the negotiating table. The speed of change has become so accelerated that established decision-making models (even the ones we created just last week) seem increasingly outdated. Therefore, we’re more speculative and finding ourselves relying on our “gut feeling,” because it seems there’s nothing more dependable to lean on. Ironically, risk based on speculation verified by our gut feeling can create even more uncertainty. While we may not be able to avoid it, we can mitigate the riskiness of our decisions.

Research shows that there are significant "risk gaps" between the risks we take for ourselves and those we would recommend to others. Which explains why 9 out of 10 drivers support laws banning texting while driving while up to 80% of the population has done this at least occasionally. Just because we want someone else to take or avoid a risk doesn’t mean we’re willing to do the same for ourselves.

In a negotiation, it becomes a reflexive issue and can be used to your advantage when testing how risky something may be. For instance, see if the other party is willing to take on the same risk that they’re asking you to take on. If they refuse, then they may be asking you to do something that’s too risky. This should give you pause before accepting. If they’re willing to take on the same risk, then that might mean that the risk is not as great. Regardless, if they are willing to take on the same risk, then at least it’s mutually burdened. Here are some common risk areas where you can test the gap: mutual cancellation language, performance guarantees with penalties and incentives for both parties, or mutual indemnification protections.

The risk we eventually take on is heavily influenced by those around us. Not just in our personal network, but also by those in the marketplace (think: competitors, peer companies, etc.). Research shows that our peer networks play an important role in persuading us to engage in activities that we know to be potentially risky. By the same token, the decisions we make can have a powerful influence on those around us.

Think about the times you’ve sat at the negotiating table and heard the words “all of your competitors have agreed to this” or “we don’t do this for any of our clients.” Both may be true, but more often than not it's a way to use social influence to get you to take on more risk. When you hear that “everyone is doing it,” ask for evidence and challenge the thinking. Make them get specific regarding what everyone else is doing and how they’re doing it. You may find that those were platitudinal statements representing aspiration more than reality.

While the above is an overt way to influence your risk profile, there are more subtle things happening around you every day. When you read an article about potential re-lockdown due to COVID-19 spikes, you can’t help but think about how that will impact yourself and your business. Likewise, when you hear about a competitor or client laying off employees, or a vendor winning or losing business, it starts to subconsciously influence your gut feeling and the risk you’re willing to take on. To protect against your own decision bias, challenge your thinking. Do your research or ask others for their point of view regarding the situation. Listen without judgement in order to expand your perspective — you might be surprised by what you learn.

Uncertainty will always exist. We’ll always take on risk, we’ll always speculate, and we’ll always have a gut feeling. To manage this appropriately so that we don’t take on more risk than we need to at the negotiating table, we need to be mindful of influences and disciplined in our decision-making.


Let Us Help You Manage Risk

In today’s climate of uncertainty, we can help you to mitigate the riskiness of your decisions at the negotiating table. Drawing on 45 years of real-world negotiating experience, we’ll assist you with getting better deals, saving time, and creating value for all involved — not to mention preserving and even strengthening relationships. Let us partner you with one of our advisers, ensuring that you’ve got the broadest view of your deal.

Talk to one of our experts today. 

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