Understanding the human element of risk
When it comes to managing risk, one oft-overlooked aspect is risk perception, or how we perceive a threat. What we believe or do not believe about risks has an enormous effect on how well we prepare ourselves for them, and the action we take when they occur.
For example, most of us are more fearful of sharks while at the beach than of developing skin cancer. In reality, annually there are only 6 deaths from shark attacks compared to 48,000 from melanoma (Sunstein 2002).
So what drives this false sense of risk?
Humans base risk-related decisions on two systems of thinking, the intuitive and the analytical (Gardner 2008). Most of us are familiar with the analytical side of risk. This system of thinking is logical, affirming our ability to make better judgments about risk using clear statistics like hazard, exposure, consequence and probability. The analytical system works slowly; it examines, calculates and considers all evidence. A decision based on facts is easy to explain, as in this common equation for risk: Risk = Probability * Impact.
While this equation has long been used to measure risk, the risk management community has seen the value of a missing variable — perception. The example of assessing the likelihood of a shark attack versus skin cancer is where the intuitive system of thinking comes into play. As it works without our conscious awareness, the intuitive system is automatic, emotional and swayed by our culture, social environment and personal experiences.
Skin cancer as a threat is something most people have a hard time visualizing – it seems to happen somewhat willingly (for example, we choose to suntan or enjoy the sun at the beach), and other time. In contrast, a shark attack can seem riskier because it’s easier for our minds to access. Recent media reports that detail random attacks or gruesome scenes from “Jaws” spark fear.
Learn more about what factors into fear and its impact on decision-making here.