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Tough Interview Answers

Tell me of a time when you were risk averse.

Senior businesspeople see business as a series of decisions about risk taking, or the balance between risk and return. This question is one way of checking your knowledge of and attitude to risk.

Demonstrate here how you evaluate and sometimes reject risky projects even though you may be under pressure from above or from your team to take them on.

This risk/return attitude to business is pushing down the line at present, and middle managers are expected to have a reasonable grasp of the topic and to take appropriate calculated risks.

KNOW WHERE THEY'RE COMING FROM

First of all make sure you know what sort of company you're applying to. If a company is set up to take high risks in the hope of exceptional returns, they look for people who are comfortable in that environment and willing to take a gamble.

Other companies settle for a lower rate of return and are generally considered to be more risk averse.

Your industry knowledge should mean that you are aware of the general risk profile of a company working within that industry. However, you can research how the company you're applying to sits within the industry. One clue to this is how the company's price/earnings ratio compares with the industry average. The higher it is the more risks the company is expected to take. This gives you a good question in the interview: 'I see that your p/e ratio is higher/lower than the industry average. Does this mean that you are less/more risk averse than your competitors?' This knowledge flavours your reply to this question to suit the company. You don't want to apply to the local undertakers and look like someone prepared to put a month's salary on 36 Red.

Remember that risk aversion can be both good and bad. Being risk averse is often good when you're bucking the trend or the flavour of the month; when you're not getting involved when the high rollers are riding for a fall. (The telecommunications companies who didn't get into trouble during the internet bubble at the beginning of the century were the ones who were more risk averse.) The downside of risk aversion is missing out on opportunities and then missing out on the returns.

AND SO THE DEMONSTRATION

They've asked you for an example, so give them one. You could try a financial one. 'The IT people wanted my team to implement a new computer system that had heavy backing from top management. They made impressive demonstrations of the cost/benefit argument, but I had a huge doubt that the benefits would be as large as they claimed. And I knew of course that the costs quoted would be at best the minimum they would charge. I demurred and then watched as other departments implemented the system and then complained about the returns later on. IT had to lower the price and then we went for it.' This example has all the ingredients you want: not giving in to pressure, good judgement and the proof that you were right.

Or perhaps a people-oriented one. 'A salesman with a terrific track record wanted to join my team selling to the Ministry of Defence. He also had a reputation for flashy behaviour and sailing very close to the wind. My manager urged me to take a risk with him. He believed that the salesman's flair would overcome the rather formal approach of the civil servants and serving officers that we had to deal with. Rejecting that advice, and the salesman, did me some harm. People began to mutter about me becoming as stuffed shirt as my customers. Then they took the same guy on to work with another government department. He lasted three months before the customer insisted he was taken off the account.' Or you could give a personal example, such as not buying a house that would stretch you too much if interest rates went up.


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