How Much Risk Are Your International Business Partners Willing To Take?

In international business, it’s really important whether partners’ views on risk taking are similar or not. Have a look at the uncertainty avoidance index of your business parners' country of origin!
uncertainty avoidance
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How a culture deals with the unknown is one of the most important aspects that affect its philosophy, beliefs and general attitude towards life and the world itself. Mankind has numerous ways of dealing with the uncertain, a few major ones of them being: religion, law and technology.

Religion focuses on accepting the uncertain, while the law gives life a tangible frame with the help of formal rules, and technology helps to navigate in the uncertainty of nature by creating new developments. And of course, we have science, for trying to understand the uncertain.

Uncertainty Avoidance Index

The uncertainty avoidance index is one of Hofstede’s cultural dimensions. By definition, it indicates a country’s tolerance towards unpredictability. Societies with high uncertainty avoidance tend to minimize their exposure to ambiguity, while those ones with low uncertainty avoidance show a more “we will cross that bridge when we come to it” attitude.

It is also important to mention the paradox – which is a paradox only at the first look – of it: Typically we imagine Mediterranean countries, for example, as societies with low uncertainty avoidance, as they seem so easygoing and careless, while studies show that these countries have a really high uncertainty avoidance, and precisely this is why they have lots of rules, but people tend to “get lost” in them, and not always follow them, or not knowing which one to follow in given situations.

Research shows that in cultures with high uncertainty avoidance showing emotion can be a way of “blowing off steam”, so this is why for example in Italy a minor car crash can result in a major chaos behaviour-wise, while in a country where the tolerance for unpredictability is much higher, like in England for example, a minor car crash is much easier handling.

View On Risk-Taking

Uncertainty avoidance has also a major say in the business and workplace ethics in a country. For example, in business, it’s really important whether partners’ or potential partners’ views on risk-taking are similar or not. In high uncertainty avoidance countries, people tend to minimize risks or opt for the known risks over the unknown ones, while in low uncertainty avoidance countries people are more willing to take risks.

Also, there are other examples of high/low uncertainty avoidance that affect the business culture in a country. Power structures vary around the world based on how people handle ambiguity, strict hierarchical structures being characteristic to high uncertainty avoidance countries, shaping the interpersonal relationships in a corporate environment.

Strict formalities are another way of coping with uncertainty, and countries that tend to avoid it, have more formal ways of maintaining their relationships. Strictly maintaining tradition is yet another way of coping with the unsure, just as well as detailed planning and loyalty to institutions, established entities and even brands, which takes us to the consumer-side of high/low uncertainty avoidance.

Some examples of countries with high uncertainty avoidance are Greece, Belgium, Russia, Italy and Mexico, while some examples for low uncertainty avoidance are the USA, UK, India, China, Indonesia and Singapore.

Eszter Szűcs-Imre

Key Takeaways

  • The uncertainty avoidance index is one of Hofstede’s cultural dimensions. By definition, it indicates a country’s tolerance towards unpreditcability.
  • Societies with high uncertainty avoidence tend to minimize their exposure to ambiguity, while those ones with low uncertainty avoidance show a more “we will cross that bridge when we come to it” attitude.
  • In business it’s really important whether partners’ or potential partners’ views on risk taking are similar or not.
  • Power structures vary around the world based on how people handle ambiguity.
  • Further examples of coping with the unknown are strict formalities, maintaining tradition, just as well as detailed planning and loyalty to institutions, established entities and even brands.
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