Intuition as a Critical Success Factor in Business Risk Management

By Dr. Linah Askari Assistant Professor, Psychology

Department of Business Psychology College of Economics & Social Development

Institute of Business Management Support & Guidance by The Administration & Faculty

Abstract

Objective
Risk management is attempting to identify and then manage threats that could severely impact or bring down the organization. Generally, this involves reviewing operations of the organization, identifying potential threats to the organization and the likelihood of their occurrence, and then taking appropriate actions to address the most likely threats. Our objective is to explore the relationship between them and provide insight to decision makers in business to use the power of their intuition (intuitive thinking / intuitive intelligence) in an optimal way. With experience, practice and wisdom they would be able to blend their intuitive styles in personal and professional life for Effective Business Risk Management.

Introduction

Intuition and Risk Management

Wikipedia (2010) defines that, Intuition is the knowledge gained by the use of faculty (power, ability) of knowing or sensing (through eight senses); a perceptive insight, it may also be known as guidance and communication for the human beings by the creator. On the other hand, business risk management is the identification, assessment, and prioritization of risks in business. According to Hillson (2007), we should combine intuition with a more rational approach, to get the best of both worlds. This involves the following: * Listen - Use intuition to validate the outputs of our decision-making and risk processes. * Learn - Seek to capture the embedded knowledge of experts, and make it available for others. * Grow - Develop our own intuitive skills through practice and feedback.

Douglas (2009) defines, Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events. Risks can come from uncertainty in financial markets, project failures, legal liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attacks from an adversary.

1. Symbolic and Imaginal Processes 2. Direct and Psychic Experiences 3. Sensory and Feeling Modes 4. Empathetic Identification

5. Through Our Wounds

(Blends of Intuitive Styles)

Literature Review

. * Michael Eisner, Former CEO of the Walt

Disney Company states, "Balanced emotions are crucial to intuitive decision making." * Donna Karan, Fashion designer , "One of our greatest gifts is our intuition. It is a sixth sense we all have we just need to learn to tap into and trust it."

Literature Review
The Case Study researches reveal; * Masaru Ibuka, Founder and chairman of Japan's Sony Corp was asked in an interview, "What is the secret of your success?" He said he had a ritual. Preceding a business decision, he would drink herbal tea. Before he drank, he asked himself, "Should I make this deal or not?" If the tea gave him indigestion, he wouldn't make the deal. "I trust my gut, and I know how it works," he said. "My mind is not that smart, but my body is."

Literature Review
* Doug Greene, Chairman of New Hope Communications acknowledge, "If I don't feel good in my stomach about a decision, I don't care if the numbers say we're going to make a billion dollars. That's how important intuition is to me. It's an actual feeling either way. When it doesn't feel good, it's just like a stomachache or a nervous stomach and when a decision feels right, it's like a great meal."

In order to determine the relationship between intuition styles and effective business risk management we took a sample of 243 male and 77 female decision making personnel within the firms of Korangi Association of Trade and Industry (KATI), which represents more than 2500 industrial, commercial and service units in Karachi. The good response rate was seen, as we approached 410 personnel and in turn received 320 responses. The survey method was used to solicit information from the respondents, which is popular in an organizational setting, and according to Frey, Botan, Friedman and Kreps (1991), it enables the researcher to learn about the characteristics of a large population and to gather information from respondents representing a specific population about their values, decision making, attitudes, behavior patterns and beliefs.
Each personnel was required to fill up the following questionnaires; 1. Intuition Questionnaire by Rosemarie Anderson (2007) at rosemarie@wellknowingconsulting.org http://www.wellknowingconsulting.org/index.html 2. Business Risk Management Questionnaire developed by Sullivan and Streater (1999)http://www.audit.nsw.gov.au/publications/questionnaires/RiskSurveyIn strument.pdf

Methodology
Each respondent was required to fill up the Intuition Questionnaire developed by Rosemarie Anderson (2007). This questionnaire is used to help an individual to identify the strength of their five Intuitive Styles, on a Likertscale (with the scoring of never=1, seldom=3 and always=5), from which people can identify and refine any one as their own preferred style and develop others to enhance their current intuitive skills for themselves in personal and professional areas. The intuitive styles are; i) symbolic and imaginal processes, ii) direct and psychic experiences, iii) sensory and somatic modes, iv) empathic identification, and v) through your wounds. The Business Risk Management Questionnaire developed by Sullivan and Streater (1999) is divided into the following segments: a) organizational culture and support, b) risk management policy, c) organizational objectives, d) risk identification, e) risk analysis, evaluation and treatment, f) risk monitoring and review & g) effective risk management. Questions focus on how the company identifies and communicates about risk, utilizes effective processes to manage risks across the enterprise, and supports those processes with a business risk management infrastructure.

Critical values for the levels of intuition on Anderson questionnaire are; Less use of intuition = scores from 30 70 Average use of intuition = scores from 71 110 Higher use of intuition = scores from 111 150 Critical values for the levels of effective business risk management on Sullivan and Streater questionnaire are; Ineffective business risk management = scores from 65 150 Average business risk management = scores from 151 230 Effective business risk management = scores from 231 315 Targeting of the participants was based on the following formula: H = N..(1) n = __N____ 1+N (e)2 Where n is the sample size, N is the population size and e is the level of precision with a 95% confidence level and a position of (+ 5 percent) i.e. P = .05 n= 2500________ = 320 participants 1 + 2500 (.05)2

Correlations Business RiskMana Intuition Intuition Pearson Correlation Sig. (2-tailed) N BusinessRiskMan Pearson agement Correlation Sig. (2-tailed) N .000
c. Dependent Variable: BusinessRiskManagement Model Summaryc,d

Change Statistics

gement 1 .392**
Model 1 R .889a R Squareb .790 Adjusted R Square .790 Std. Error of the Estimate 98.53968 R Square Change .790 F Change 1202.801 df1 1 df2 319 Sig. F Change Durbin-Watson .000 2.679

.000 320 .392** 320 1

a. Predictors: Intuition

b. For regression through the origin (the no-intercept model), R Square measures the proportion of the variability in the dependent variable about the origin explained by regression. This CANNOT be compared to R Square for models which include an intercept.

320

320
d. Linear Regression through the Origin

**. Correlation is significant at the 0.01 level (2-tailed).

Hypothesis 2: Use of Intuition is positively correlated with Effective Business Risk Management in Males as compared to Females.
Correlations IntuitionMales IntuitionMales Pearson Correlation Sig. (2-tailed) N BRMMales Pearson Correlation Sig. (2-tailed) N **. Correlation is significant at the 0.01 level (2-tailed). 243 .791** .000 243 243 1 BRMMales .791** .000 243 1

Model Summaryc,d Change Statistics Std. Error of the Model 1 a. Predictors: IntuitionMales b. For regression through the origin (the no-intercept model), R Square measures the proportion of the variability in the dependent variable about the origin explained by regression. This CANNOT be compared to R Square for models which include an intercept. c. Dependent Variable: BRMMales d. Linear Regression through the Origin R .849a R Squareb .722 Adjusted R Square .721 Estimate 38.06502 R Square Change .722 F Change 7448.899 df1 1 df2 242 Sig. F Change .000 Durbin-Watson 2.522

Correlations IntuitionFemales IntuitionFemales Pearson Correlation Sig. (2-tailed) N BRMFemales Pearson Correlation Sig. (2-tailed) N *. Correlation is significant at the 0.05 level (2-tailed). 77 .290* .010 77 77 1 BRMFemales .290* .010 77 1

Model Summaryc,d

Change Statistics Std. Error of the Model 1 R .743a R Squareb .552 Adjusted R Square .546 Estimate 146.33371 R Square Change .552 F Change 93.663 df1 1 df2 76 Sig. F Change .000 Durbin-Watson 2.226

a. Predictors: IntuitionFemales

b. For regression through the origin (the no-intercept model), R Square measures the proportion of the variability in the dependent variable about the origin explained by regression. This CANNOT be compared to R Square for models which include an intercept.

c. Dependent Variable: BRMFemales

d. Linear Regression through the Origin

Results of Hypotheses 3 - 7
Linear Correlations
**. Correlation is significant at the 0.01 level (2-tailed) & *. Correlation is significant at the 0.05 level (2-tailed).
Variables Business Business Business Business Business Business Business Risk Risk Risk Risk Risk Risk Risk Management Management Management Management Management Management Management - Risk - Risk - Risk - Risk - Effective Organization Management Organization Identification Analysis, Monitoring Risk Policy al Objectives and Review Management al Culture Evaluation and Support and Treatment

Intuition Symbolic and Imaginal Processes

.698**

.768**

.367*

.253

.196

.311

.197

Intuition Direct and Psychic Experiences

Intuition Sensory and Somatic Modes Intuition Empathetic Identification Intuition Through Your Wounds

.378*
.165 .213 .256

.593**
.237 .142 .119

.632**
.547** .382* .245

.183
.367* .772** .196

.324
.174 .115 .689**

.219
.598** .596** .431*

.106
.283 .291 .624**

Results of Hypotheses 3 - 7
Regression Analysis: Magnitude of the Determinant R square X 100 shows the % of influence of Intuition styles upon the factors of Business Risk Management
Variables Business Business Business Business Business Business Business Risk Risk Risk Risk Risk Risk Risk Management Management Management Management Management Management Management - Risk - Risk - Risk - Risk - Effective Organization Management Organization Identification Analysis, Monitoring Risk Policy al Objectives and Review Management al Culture Evaluation and Support and Treatment

Intuition Symbolic and Imaginal Processes Intuition Direct and Psychic Experiences Intuition Sensory and Somatic Modes Intuition Empathetic Identification Intuition Through Your Wounds

75.8% 51.4% 23.7% 29.8% 43.7%

84.3% 68.5% 31.8% 22.3% 21.5%

58.9% 79.7% 67.1% 52.6% 38.9%

35.9% 29.5% 50.8% 82.3% 25.4%

28.7% 46.5% 24.8% 21.7% 80.6%

51.6% 33.6% 81.8% 73.7% 58.3%

26.5% 31.7% 34.2% 35.7% 74.8%

Hypothesis 3: Intuition style, symbolic and imaginal processes has the highest value in correlation with effective business risk management for; a) Organizational culture and support .698** / 75.8% b) Risk management policy .768** / 84.3%

Hypothesis 4: Intuition Style direct and psychic experiences has the highest value in correlation with effective business risk management for; a) Risk management policy .593** / 68.5% c) Organizational objectives .632** / 79.7%

Hypothesis 5: Intuition Style sensory and somatic modes has the highest value in correlation with effective business risk management for; c) Organizational objectives .547**/ 67.1% f) Risk monitoring and review .598** / 81.8%

Hypothesis 6: Intuition style, empathetic identification has the highest value in correlation with effective business risk management for; d) Risk identification .772** / 82.3% f) Risk monitoring and review .596** / 73.7%

Hypothesis 7: Intuition Style Through Your Wounds has the highest value in correlation with effective business risk management for; e) Risk analysis, evaluation and treatment .689 **/ 80.6% g) Effective risk management .642**/ 74.8%

I deeply thank Almighty Allah, Shahjahan Syed Karim, Ms. Sabina Mohsin, Talib Syed Karim, Jawed Akbar Ansari, psychologists and students helped in compiling the data, the Administration and Colleagues of the Institute of Business Management and my family for their Guidance and Cooperation in publishing and presentation of the paper.