??InSPiR2eS Thought of the Week #5: Embracing Risk Management as a Natural Hedge in Research Projects ??

In research, the outcome of a project is inherently uncertain. True science thrives on inquiry, not predetermined answers, meaning researchers often don’t know whether their findings will be positive, neutral (null), or even negative. This level of uncertainty calls for a strategic approach in research design, which I’ll refer to as “natural hedge” risk management. The concept of a natural hedge means constructing projects that offer valuable insights across all potential outcomes, rather than depending solely on one favorable result. By designing with this approach, we encourage research projects that are resilient, insightful, and aligned with the principles of responsible science (Faff, 2021). Notably, the focus of this post falls squarely in the realm of “Other Considerations” in Faff’s (2024, SSRN) PRF.

?

Understanding Outcome Risk in Research

Traditional concepts of risk in research often bring ethical concerns to mind, such as ensuring participant safety. While these ethical considerations are foundational, “risk” can also apply to the uncertain nature of the research outcomes themselves. Unlike business or investment risk, where profit and loss depend on market forces, research risk relates to the uncertainty of whether the project will yield findings that are valuable or align with the researcher’s hypotheses. However, this uncertainty can be managed, and even embraced, through the “natural hedge” approach.

?

By planning a research project with a natural hedge, researchers can design a study that yields relevant insights regardless of whether the findings are positive, null, or negative. This flexibility in design isn’t just about safeguarding against “failure” but about recognizing the intrinsic value in diverse outcomes, each of which can expand the knowledge base of a field. It reflects a commitment to learning from every aspect of a study, rather than solely from confirmatory results.

?

The Benefits of a Naturally Hedged Project

Designing research with a natural hedge provides a structured way to manage outcome risk and allows researchers to benefit from each potential result:

1. Positive Result: When results support the hypothesis, they reinforce the underlying theory, adding validation to the researcher’s approach and advancing existing knowledge.
2. Null Result: A finding with no observed effect can reveal that a hypothesized relationship is weaker or nonexistent. Far from being a setback, null results often encourage researchers to explore alternative explanations or factors that might better explain the phenomena under study.
3. Negative Result: If results contradict the initial hypothesis, they can challenge established theories or assumptions, sparking new questions and potentially leading to paradigm shifts within a field.

By framing research outcomes in this way, we ensure that each potential finding has value, serving as a piece of the larger puzzle of knowledge. The “kicker” is to set up these alternatives right from the very beginning of the project in a way that is meaningfully and powerfully founded on compelling theory foundations (avoiding criticisms of “straw man” elements that can be readily knocked down). Of course, the way to help “nail” this is via pre-registration, aligning with Responsible Science principles. [put another way, the “natural” part must be truly “natural” … even a hint of contrivance will be seen through and render the exercise as at best an “embarrassment”!]

?

Practical Example of the Natural Hedge in Action

Consider a study exploring the relationship between a new workplace incentive program and employee productivity. The project might be designed with credible hypotheses about how the incentive could lead to positive productivity gains. However, it could also yield a null result (no effect) or a negative result (productivity decrease).

• Positive Outcome: If the incentive program leads to improved productivity, the study offers practical recommendations for organizations looking to boost performance.
• Null Outcome: If the incentive has no measurable effect, this result could prompt a reassessment of what drives productivity. The existence of theoretically identifiable countervailing forces are helpful and enlightening. It might also suggest that other motivational factors are more influential, opening new areas for research.
• Negative Outcome: If productivity decreases, this might suggest unintended consequences of the incentive program, such as added stress or unhealthy competition. This outcome would be valuable for organizations seeking to implement changes responsibly. But, it is critical for researchers to anticipate this potential outcome and offer (before the fact) theory that would plausibly predict such a “negative” outcome. AND, in line with Responsible Science … what must be avoided at all costs is the temptation of HARKing … hypothesising after the results are known!

Following this guidance, in each case, the study advances our understanding of employee motivation and productivity in ways that can be practically applied, regardless of the specific outcome.

?

Steps to Implement Natural Hedge Risk Management

Creating a naturally hedged project requires a shift in mindset and approach. Researchers should consider the following steps to maximize the relevance and resilience of their studies:

• Value Each Outcome: When designing a study, reflect on the insights that each possible outcome might offer. Aim to develop a project where each result—positive, null, or negative—could inform future research or practice.
• Strengthen Theoretical Foundations: A robust research design should have a solid theoretical foundation that can accommodate multiple outcomes. This helps ensure that findings will be meaningful, even if they diverge from initial expectations.
• Ask Broader Questions: To avoid overly narrow research questions that hinge on one desired outcome, consider asking broader questions. Broader inquiries allow for flexible interpretations that remain relevant under various outcomes.
• Plan for Alternative Explanations: Build in space within your research framework for interpreting alternative findings. This involves considering potential limitations and framing questions to address these alternative explanations, should they arise.

?

Concluding Thoughts: Responsible Science Through the Natural Hedge

The natural hedge approach emphasizes inquiry and genuine discovery. It moves away from selective confirmation toward responsible science—what we need to know, rather than what we hope to find. This approach enables researchers to contribute durable, valuable insights to their fields, fostering a commitment to genuine scientific progress and integrity.

?

In designing your next project, ask yourself: “How will each potential result advance knowledge in this field?” If only one outcome has real value, consider ways to broaden the scope. Projects with a natural hedge are resilient to unforeseen findings, reinforcing the mission of responsible science by prioritizing inquiry and learning over prescriptive outcomes.

?

Acknowledgement: This post was substantially assisted by ChatGPT!