Fatigue and risk appetite: what leaders should watch for
Keep agreed risk limits separate from a tired decision maker’s momentary confidence. Use a second review for choices close to those limits.
The performance question
A fatigued team might accept an exposure without fully testing it, or postpone an opportunity without understanding the cost. Neither behaviour establishes a predictable direction of risk appetite. The board needs a consistent way to compare a proposal with its agreed limits.
What the evidence supports
HSE lists underestimation of risk among possible effects of fatigue, alongside reduced awareness and information processing. This is hazard guidance, not evidence that every tired executive becomes more willing to take commercial risk.[1]
A practical approach
For acquisitions, lending exceptions or major supplier commitments, require the proposal to state the relevant limit, the downside scenario and the authority needed for an exception. If the team has been working unusually long hours, obtain an independent review or defer a reversible choice. Do not delay immediate protective action.
How to review progress
Sample exceptions for completeness and compare the assumptions with subsequent outcomes. Ask whether the second reviewer had genuinely independent information. An unchanged number of exceptions can still conceal better or worse reasoning, so inspect the rationale rather than relying on volume alone.
Sources and references
- Human factors: Fatigue Opens in a new tab
Health and Safety Executive
Why fatigue matters and key principles for managing working hours