Risk psycholog is a fascinating field of
research. There is an unavoidable, yet desirable, subjectivity to risk
analysis and a natural inclination to focus on impact, because it is harder to
comprehend likelihood in quite the same way. The result is that likelihood
becomes exaggerated.
Consider the insecurities many people have about flying. The consequences of an airborne disaster are easy and somewhat unsettling to imagine. This translates into a perception that flying is more dangerous (i.e., more risky) than it is- perhaps even more risky than driving.
The fact that a passenger is more likely to suffer injury or death in the car on the way to or from the airport does not ease the psychological weight given to the risk level associated with flying. This has to do with the element of personal control. When driving a car, the driver feels—rightly or wrongly—that he can make a personal intervention to avoid an accident, but an airline passenger must rely on the pilot’s actions, someone else’s security arrangements, and the mechanical integrity of the plane.
Likewise, the psychological element is important when considering risk appetite. A group of managers may agree on the defined appetite of the organization, but each individual may vary when it comes to being either a risk taker or a risk avoider. The perceived level of acceptable risk depends on how it aligns with personal risk appetite.
In all situations, the role of “risk management” is to try to lead organizations toward an understanding of risk and objective appraisal while recognizing both the inevitability and value of subjective impressions. Armed with better information, the organization can make a more intelligent response.
Consider the insecurities many people have about flying. The consequences of an airborne disaster are easy and somewhat unsettling to imagine. This translates into a perception that flying is more dangerous (i.e., more risky) than it is- perhaps even more risky than driving.
The fact that a passenger is more likely to suffer injury or death in the car on the way to or from the airport does not ease the psychological weight given to the risk level associated with flying. This has to do with the element of personal control. When driving a car, the driver feels—rightly or wrongly—that he can make a personal intervention to avoid an accident, but an airline passenger must rely on the pilot’s actions, someone else’s security arrangements, and the mechanical integrity of the plane.
Likewise, the psychological element is important when considering risk appetite. A group of managers may agree on the defined appetite of the organization, but each individual may vary when it comes to being either a risk taker or a risk avoider. The perceived level of acceptable risk depends on how it aligns with personal risk appetite.
In all situations, the role of “risk management” is to try to lead organizations toward an understanding of risk and objective appraisal while recognizing both the inevitability and value of subjective impressions. Armed with better information, the organization can make a more intelligent response.