Theories of Leadership and Risk


While the variety of organizational structures is considerable, all of them remain united by the pivotal status of the leadership model at their cores. In many ways, leaders define organizations by determining their internal decision-making paradigms, corporate culture, and ability to withstand modern challenges. In this regard, the history of research has culminated in the formation of multiple leadership theories, some of which are more prominent than others. This report reviews contingency, participative, and transactional theories of leadership. The perspective implies that one of the key objectives faced by organizations is to mitigate their risks, and this factor is largely determined by the stakeholders.


Researchers tend to acknowledge the general changeability and variability of the business landscape. With multitudes of possible situations, the optimal manner of leadership is determined by the properties of the specific context, as suggested by the tenets of the contingency theory. In other words, there is no uniform style or pre-existing determinants that render a leader efficient or inefficient (Abba et al., 2018). For example, one setting will be optimal for an energetic, impulsive leader who inspires others. At the same time, a different situation will require a rational, methodical manager with a moderate approach (Lartey, 2020). The key advantage of this theory is embedded in its universality, meaning that it acknowledges the complexity of the concept of leadership. It is particularly today that the increasing globalization and digitalization of the global community continuously add new dimensions to business practices.

On the other hand, the contingency theory focuses on the qualities of the leader with less attention to the second aspect of this work, which is the team. The participative theory focuses on this aspect, suggesting that the most optimal leadership style values and promotes the activity and input of each employee (Odoardi et al., 2019). A manager is to execute the decision-making process in light of the perceived contribution of the workers to the organizational performance. Furthermore, this theory supports an inclusive stance on employees’ involvement in decision-making (Lonati, 2020). When combined with a fitting motivation, this approach can generate an unparalleled level of engagement by improving the leader-follower interaction. Yet, it is not immune to subjectivity and biases, which is why this effect is to be considered with due precautions.

The aforementioned concept of motivation becomes the central idea of the transactional model of leadership. As per this theory, a manager and an employee remain in the constant exchange of desirable outcomes, which propels the performance of the organization or a team (Cho et al., 2018). More specifically, a leader wants a follower to accomplish a specific task that will contribute to the operational and strategic success of the company. Simultaneously, the employee expects to be rewarded for the contribution. This theory appears extremely efficient because it tends to concentrate on fundamental types of motivation in the form of monetary rewards (Hansen & Pihl-Thingvad, 2019). Yet, it also implies an increased level of micro-management and supervision. This situation requires a strong degree of engagement by the leader, which may also be considered unnecessary pressure that limits creativity and puts additional stress on some employees.


Overall, despite the variety of leadership theories, they pursue a common goal. It consists of accomplishing the strategic objectives of the company by maximizing the efficiency of the team and minimizing the risks. These risks originate from a variety of sources, but the stakeholders remain the primary ones (Mohamed et al., 2022). All of the leadership theories target the internal landscape of the firm, and exercising leadership over stakeholders is not possible (Adib & Zhang, 2019). At the same time, their actions and intentions become the final determinants of operational success. Thus, the key goal of leadership is to create a resilient structure that will cope with risks efficiently.


Abba, M., Yahaya, L., & Suleiman, N. (2018). Explored and critique of contingency theory for management accounting research. Journal of Accounting and Financial Management, 4(5), 40–50.

Adib, M., & Zhang, X. Z. (2019). The risk-based management control system: A stakeholders’ perspective to design management control systems. International Journal of Marketing and Enterprise Development, 18(1-2), 20–40.

Cho, Y., Shin, M., Billing, T. K., & Bhagat, R. S. (2019). Transformational leadership, transactional leadership, and affective organizational commitment: A closer look at their relationships in two distinct national contexts. Asian Business & Management, 18, 187–210.

Hansen, J. A., & Pihl-Thingvad, S. (2019). Managing employee innovative behaviour through transformational and transactional leadership styles. Public Management Review, 21(6), 918–944.

Lartey, F. M. (2020). Chaos, complexity, and contingency theories: A comparative analysis and application to the 21st century organization. Journal of Business Administration Research, 9(1), 44-51.

Lonati, S. (2020). What explains cultural differences in leadership styles? On the agricultural origins of participative and directive leadership. The Leadership Quarterly, 31(2), 101305.

Mohamed, N. T., Eid, A. F., & Khodeir, L. M. (2022). Assessing the impact of stakeholders’ interaction on the efficiency of managing risk in construction projects: A literature review. Engineering Research Journal, 173, 299–315.

Odoardi, C., Battistelli, A., Montani, F., & Peiro, J. M. (2019). Affective commitment, participative leadership, and employee innovation: A multilevel investigation. Journal of Work and Organizational Psychology, 35(2), 103–113.

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