Risk Shrink: The Human Element of Risk
At the RIMS 2017 Annual Conference, Hester Shaw, Internal Control Framework Director, GSK, and Sean Murphy, CEO, Lootok, lead a session titled Risk Shrink: The Human Element of Risk. The human element of risk is normally the one left off, but is one of the most important aspects in risk management.
Each person behaves different in different situations based on their experiences and backgrounds. One speaker gave an example of two employees who were in Bueno Aires and were confronted by two strangers. The strangers tried to take their bags. Each woman responded differently based on their experience. One women fought back and the other froze. One of women had been approached by strangers in years past and knew how to handle the situation. The other woman who froze had never been in a situation like this. She watched her friend fight back and learned how to handle this situation.
There are three parts to the human element of risk – culture, personality and experiences – that affect the way we perceive, process and respond to risk.
There are 10 dread factors. These include scale, immediacy, imaginability, personal control, lack of choice, unfairness, children, lack of familiarity, untrustworthy origin, and media coverage.
Let’s take a deeper look at three of them.
- Immediacy – when times passes before the negative consequences of the risk occur, dread decreases.
- Imaginability – when a risk is easy to imagine, dress increases examples are natural disasters or terrorists attacks vs skin cancer. Drowning vs food poisoning.
- Media coverage – when there is a lot of media coverage of an incident, dread increases. Now there is more media outlets than ever so there is more media surrounding an event than ever before so dread increases. Reputation is everything so how to make sure there is something in place to handle these situations.
Takeaways from a risk perception are:
- Revisit your risk matrix and assessments
- Assess your dread factors
- Look for availability heuristics
- Look for compounding effects
- Categorize by actor an owner
- Long-term planning
- Training and awareness
Risk processing – It is important to understand stress and crisis. Positive stress is motivating and pushes to action and accomplishment but negative stress is too high and the body and/or mind responds negatively. This can reduce the mental capability for processing messages. This impacts decision making. There are three different levels: “cognitive lock-in” is stick with our initiative decision, too stressful to change our minds, “task saturation” is focusing on small problems and losing sight of the big picture and lastly there is “group think”, which is putting the well-being of the group above making the right decision.
Risk response – There are several types of responses. Three of them are denial, freezing and heroism.
Denial – We get used to the normal things in our life and we do not like when something changes especially a big event, our mind cannot process such extreme change.
Freezing – When a tragic event happens your body goes into shutdown or freeze mode, which is actually a natural instinct.
Heroism – Rescue everyone from a tragic event, you take on that hero role sometimes it can be the people we least expect but the person with the most empathy. Scared of doing nothing so they go into superhuman mode to help.
It is important to understand common fear factors and why our emotional perception often overrides fact or reason. Leverage the analytic and intuitive as complementary ways for evaluating risk.