Risk Doctor Network Briefing
May/June 2008
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Meet the Risk Doctor
David Hillson is in the middle of a busy travelling period. In the last week of May he will be in Italy, then during June David will be working in the Czech Republic, Greece, USA and UK. July sees one more overseas trip, this time for a well-earned family holiday!
Risk Doctor services are available across the globe, so please visit the Events page at www.risk-doctor.com for full details of public events. If there's nothing currently planned near you, why not contact us to arrange an event .
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Introducing the Risk Doctor Network
This Network is for people who wish to receive regular email updates (about every 8 weeks) on current issues in risk management. The latest briefing is below, and we hope you find it interesting, stimulating and useful. Why not give us your feedback or tell us what topics you'd like to see addressed in future briefings?
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Quick Links
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The Risk Doctor Website
[Useful links, papers, briefings, book information etc.]
Risk Attitudes
[The home of MANAGED RISK ATTITUDE]
ATOM risk process
[Discover ACTIVE THREAT & OPPORTUNITY MANAGEMENT]
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Briefing
WHAT DRIVES RISK ATTITUDE?
[ Copyright May 2008, David Hillson/Risk Doctor Limited]
It seems obvious to say that people are essential if risk is to be managed effectively. Risk management is not done by robots or machines, but by people, acting individually and in groups. One of the biggest influences over the risk process are the risk attitudes which people adopt. These affect every aspect of the risk process, even if people are unaware of it. Understanding and managing these risk attitudes would significantly increase risk management effectiveness - so what are they and what affects them?
One simple definition of "risk" is "uncertainty that matters", and it is only possible to define a risk in relation to something specific, usually an objective of some kind. A person's view of risk is also affected by their perception of such things as the likelihood of the risk occurring or the impact if it were to happen. Similarly "attitude" is " a chosen response to a given situation", and it too is related to a specific situation and affected by perception. Combining the two definitions of "risk" and "attitude" allows us to build a working definition of "risk attitude": "a chosen response to uncertainty that matters, influenced by perception".
If we want to understand risk attitudes we need to be clear about the role of perception in shaping them. Recent research has uncovered three major types of influence on the perception of risk, known as the "triple strand". This is made up of conscious factors, subconscious factors, and affective factors. While the three parts of the triple strand overlap and interact in complex ways, it is helpful to tease out each of the three elements so that they can be examined and understood.
Strand 1 - Conscious factors: These are the visible and measurable characteristics of a particular risky situation, based on our rational assessment. We also take account of situational factors such as whether we have done anything similar before (familiarity), the degree to which we have control of the situation (manageability), or how soon the situation is expected to affect us (proximity).
Strand 2 - Subconscious factors: These include heuristics and other sources of cognitive bias. Heuristics are mental short-cuts based on our previous experience. Some heuristics help us to reach an appropriate position quickly, while others can be misleading. Unfortunately because heuristics are subconscious, their influence is often hidden, and they can be a significant source of bias. Common heuristics include memory of significant events (availability), or the conviction that we already know the right answer (confirmation trap).
Strand 3 - Affective factors: These are gut-level visceral feelings and emotions which tend to rise up automatically or instinctively in a situation and influence how we react. Fear, excitement or attraction can lead us to adopt risk attitudes which a more rational assessment might not consider.
The triple strand of influences interact together to affect perception in two important ways: how people perceive a particular risky situation, and what they perceive as the right way to respond to it. By appreciating how the triple strand factors drive our perception of risky situations, we will understand better why we adopt different risk attitudes. This will help us to manage our attitudes to risk proactively so that we make good decisions, select appropriate responses, and improve our management of risk.
[ To find out more about the triple strand, risk attitudes, and how they affect our ability to make risky decisions, get your copy of the new book by Ruth Murray-Webster and David Hillson, " Managing Group Risk Attitude "
or visit www.risk-attitude.com. More details below.]
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To provide feedback on this Briefing Note, or for more details on how to develop effective risk management, contact the Risk Doctor or visit the Risk Doctor website.
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NEW BOOK OUT NOW!
Ruth Murray-Webster and David Hillson are pleased to announce their new book, Managing Group Risk Attitude , published in May 2008 by Gower (ISBN 978-0-566-08787-5). This ground-breaking book reports on our research into what influences groups making risky and important decisions. We offer a unique practical framework to understand and manage the drivers of risk attitude in these complex situations. For full details or to order your copy, visit the Books page of our website.
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Risk Conference Advance News: Nice & Monte Carlo
There are many risk conferences around the world - here's one not to miss. The PMI RiskSIG will complete their 10th anniversary celebrations with a two-day conference in Nice France on 4-5 November 2008. The event includes a special " Monte Carlo Experience" evening, as well as world-class speakers sharing best practices in risk management.
To find out more, or to offer a paper, contact Conference@RiskSIG.com .
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Contact us today!
To benefit from our unique blend of leading-edge thinking with practical application, contact us today. Our approach to maximising opportunity and minimising threats will ensure that you get the most from your business and projects. And check out the Publications area of our website www.risk-doctor.com for papers and briefings you can download, as well as the latest book news.
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