Understanding the Psychology of Risk Perception to Improve Risk Management

  • Anchoring Bias- This is generally related to the very first familiar aspect that one observes in a situation. It opens a bracket for the person within which he contains his perceptions. For example, if you’re buying something for the very first time and have no idea what the best price to pay for it should be, then the very first price that someone puts before you would give you a bracket to compare the other options of prices with.
  • Verification or Confirmation Bias- If there exists a theory or statement or any credible content, for that matter, that endorses our beliefs, we tend to believe it immediately — This is called Confirmation Bias.
  • Availability Bias- We tend to incline new or trending information while the older information gets erased or gets hazy over time.
  • Technicality-oriented: Risk perception being an amalgamation of aforesaid factors plus science and subjective judgments, a certain degree of objectivity can be brought by raising knowledge about mathematical understanding in the world of risk management.
  • Consumption Oriented: It involves framing the same question in different ways. Presentations and language have an impact on the way we react to something. By figuring out the differences or discrepancies in response to the same issue in a different set of words can define the credibility and validity of the response.
  • Diversity Oriented: Present the people from different backgrounds with the same problem and gather the responses. This could provide a wide spectrum of plausible methods to approach the problem. The differences do not indicate the incorrectness or correctness of one response or another. Instead, it presents a wider array of factors to take into consideration when coming up with an optimum management plan.
  • Timing Oriented — The risk management process is supposed to be an incessant process and as dynamic as the risks themselves. Every organization has different agendas, mechanisms, and driving forces, so the risk management strategies for each of these are congruent to their specific factors and their position at a specific point in time

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IRM Level 4 Qualified, FCA, ACS, CMIRM

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Neeraj Basur

Neeraj Basur

IRM Level 4 Qualified, FCA, ACS, CMIRM

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