Jackie Waring: Women excel at risk management and should be utilised more

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As the head of Investing Women, an organisation which provides support, encouragement and investment to female business founders, I have always believed the stereotype that portrays women as being risk-averse in business is based on a fundamental misinterpretation of typical female founders’ behaviour

Despite my own direct experience of working with hundreds of successful companies founded by women, and a raft of research studies that show women as highly-capable risk managers, I still hear this view frequently quoted.

This unfair and highly misleading stereotype affects not only women seeking to raise investment for their businesses; it has also impacted those seeking a career within the corporate world. While ‘diversity’ and ‘equal opportunity’ continue to be key buzzwords resonating from boardrooms across the world, women remain vastly under represented within risk management.

According to the 2017 Women in Financial Services report by Oliver Wyman, only 15 per cent of chief risk officers in the US are female. Meanwhile another report, released earlier this year by the world’s leading research and advisory firm Garner, found that only a quarter of global security and risk management executives were women.

It’s time to change the conversation and tackle this unhelpful stereotype. The female approach to risk management has for too long been misunderstood as ‘risk aversion’. All businesses have risks, and being smart about evaluating which ones are worth taking is a key skill which requires methodical, evidence-based rationale. There have been a number of research studies which show that this is an area where women tend to excel.

In 2015, First Round Capital analysed data from investments made by the venture capital firm in 300 companies from various sectors and the results were staggering. Those with a female founder or co-founder returned a 63 per cent higher return on than those with all-male founder teams.

Meanwhile, Grant Thornton’s Women in business: new perspectives on risk and reward report from 2017 highlighted how men and women see risk and opportunity in different ways, and act differently as a result. It found that men saw more risk than women in eight of ten categories, despite the common perception that females are more risk-averse.

At Investing Women, we frequently see female founders scaling their companies’ pitch for investment. Indeed, two thirds of all our investment activity has focused on firms with a female founder or co-founder. While it is not uncommon for some women to seek too low a figure when raising capital to achieve growth targets, our experience more often than not has chimed with the findings of First Round Capital where companies with female founders are ‘delivering’, generating maximum value from the finance they are able to secure.

In fact, Investing Women has built its successful AccelerateHER programme by leveraging a uniquely female approach to risk management and other aspects of running a business. This has led to the creation of a high-profile channel for growth-focused female founders, opening doors to investors as well as international opportunities.

In the four years we’ve been running the programme, at least £23.5 million of investment has been raised by AccelerateHER finalists, with £17m of that leveraged against funds invested by the growing number of Investing Women Angels syndicate members.

In tackling this one stereotype about women, I do believe we must also highlight how important it is to have ‘balance’ in teams as they grow. As many research studies have shown, diversity is good for business. According to the Gartner report, gender-diverse and inclusive risk management teams outperform those which are either gender-homogeneous or less inclusive by an average of 50 per cent.

The Grant Thornton report also came to the conclusion that the differing approaches between males and females regarding risk is no bad thing. It found that mixed-gender teams bring a broad perspective which makes for more comprehensive and effective risk management.

A more measured approach to risk can, however, result in asking for too little when raising funds, and this can potentially hinder growth. But this should not be viewed exclusively as a weakness, it can also be seen as a positive indicator of careful money management.

With encouragement and a coaching approach to sharing the knowledge and experience of helpful investors, this can easily become a great strength, very much to the benefit of both the founders and investors.

We are only just beginning to tap into this enormous reserve of talent that we’ve seen so ably demonstrated by many of Scotland’s female business founders. Let’s hope that further research will continue to dissipate unhelpful stereotypes. Rather than a negative perspective around the ‘female’ approach to managing risk in business, investors and employers should now recognise this key skill and the potential value and return which it can deliver.

Jackie Waring is chief executive of Scotland’s only all-female angel investor group Investing Women.

This article first appeared in The Scotsman’s winter 2019 edition of Vision. A digital version can be found here.