What is Risk?
Risk refers to the chance that our sense-making turns out to be inadequate to deal with the world safely and effectively.
Why do we Take Risks?
First, it is important to realise that risk can’t be eliminated altogether. As mentioned above, risk is a consequence of the uncertainty of the world around us.
Second, even if it were possible in principle to eliminate risk, people wouldn’t agree to it in practice. People need risk to provide excitement and to avoid boredom. If there is not enough risk present, people will behave in a riskier way to compensate.
We know that some people are more comfortable with greater risk than others, but there is evidence that while people differ in the amount of risk to which they will expose themselves, they all alter their behaviour to maintain the amount of risk with which they feel comfortable.
An example of this can be seen with the risk reductions offered by road safety improvements. Seat belts, air bags, ABS and vehicle crumple zones have merely resulted in people driving faster and closer. They have not produced an overall reduction in road accidents.
So, if risk cannot be eliminated completely, and if we wouldn’t want that anyway, then it is not risk elimination that we should seek. Rather we should give people the means to become more accurately aware of risk – in both their own behavior and the behaviour of others. This comes down to appropriate training in the human perception of risk and the factors that influence it.
Factors That Influence our Sense of Risk
Our perception of risk has little to do with the actual probability of something bad happening (see below “Are Risk and Probability the Same Thing?”) rather there are three main factors that influence our sense of risk:
- The amount of control we think we have
- The amount of value something has for us
- The extent to which things are familiar to us
Perceived Control
The more control we believe we have, the less risk we believe we are taking. For example, in the maritime industry, shore-based staff believe the risk of ship incidents is twice as great as crew members do.
The high degree of control a person thinks they have may be real – due to a well-calibrated sense of their own well-developed skills, together with a highly pertinent assessment of the situation they are in. Or at the other extreme, it may be far from the truth – due to stress or fatigue, over-confidence, lack of appreciation of missing skills or knowledge etc.
Perceived Value
The more a course of action appears to support a goal that we regard as important or highly desirable, the less risky it will appear to be (or the more we will overlook the risk normally associated with it).
An action will also appear to be of high value if it seems the easiest way to achieve a desired goal. We are routinely attracted to short cuts for this very reason – sometimes with dire consequences.
Perceived Familiarity
The more a circumstance or action seems familiar, the less risky it will appear to be.
The important thing about these three factors is that their overall mix is determined by the person who is exposed to the risk. The actual risk any one of us takes is a combination of our personal mix on the one hand, e.g. skills, training, knowledge and, on the other, the problems in the outside world that really do have nothing to do with us, such as equipment failure, poor weather conditions etc.
What are the Warning Signs That you Should not Take a Particular Risk?
Dealing with the perception of risk is not really about spotting dangers in the external world and avoiding them. It is much more about spotting weaknesses in our own assumptions about the world and managing the relationship between the world and our own imperfect knowledge of it.
Complacency is better understood as the result of a person’s badly calibrated sense of risk, rather than as a fundamental cause of incidents. We need better insight into our own risk-taking so that we can maintain it at a level that is appropriate to the real levels of control we have.
If we consider carefully the three factors mentioned above, (the amount of control we think we have, the amount of value something has for us and the extent to which things are familiar to us), then we will better be able to see the warning signs against taking a particular risk.
Pay attention to the following Do’s and Don’ts:
- DO be suspicious if things seem under control, on track, familiar, comfortable, quiet and safe. You are almost certainly missing something.
- DO try to arrange training in the human perception of risk as part of your technical training for you and your team. You are unlikely to get the necessary insight into risk taking without it, and it will also help avert the development of complacency.
- Are you a designer or equipment buyer? If yes, then DO establish how the new equipment will affect the risk awareness and risk management strategies of the users. Will they get bored? How are they likely to compensate for reduced risk by increasing it elsewhere? Will their original skills fade dangerously?
- DON’T confuse qualifications with experience. People cannot become properly aware of the risks of their working environment unless they have been directly exposed to it for a suitably long period and/or mentored by colleagues who are already aware of those risks. If people are promoted without the relevant experience, they will underestimate the risks they take as well as all those in their charge, exposing themselves, their colleagues, their companies and the environment to danger and potentially huge costs.
- DON’T confuse a person’s rank with the status of their information. It’s the person with the relevant information and experience who is often best placed to raise a concern. The higher a person’s rank, the greater the responsibility they have to ensure that those with the relevant knowledge are heard.
It’s worth noting that if our surroundings are familiar, we feel safer and more comfortable making a decision. But if we need to make a decision that is outside our comfort zone, we will often seize upon anything from our immediate environment – even if it’s unrelated. We then use this as an ‘anchor’ for our decision. Obviously we should avoid doing this!
Risk, Anxiety and Reward
There is a well-known relationship between risk, anxiety and reward – the greater the risk, the greater our anxiety, but the greater our potential reward.
Risk cannot be eliminated. It is always present because the world is always uncertain. Uncertainty arises as a result of information which is missing, unreliable, ambiguous or complex. It is the uncertainty which causes the anxiety. So if you want to reduce the anxiety and gain the greatest possible reward, do your research!
The more you can reduce uncertainty, the more you will reduce anxiety. Gather as much information as you can and ask lots of questions of many different people.
Everyone will have their own information, ideas and opinions – take all the information and apply what is meaningful to you and your situation and discard the rest! Be wise. Do not let other people’s opinions stop you from doing what you are passionate about and do not let fear alone stop you!
Are Risk and Probability the Same Thing?
At first sight, risk seems similar to probability. Car insurance companies calculate risk (e.g. of collision or loss) in terms of probability so that they can work out the premiums car owners must pay. Insurance risk is calculated from historical data and its accuracy depends on past statistical relationships holding in the future.
However, the statistical rules of probability are very different from what drives people’s perception of risk in everyday life. Consider these three possible sets of results of flipping a coin eight times (there are, of course, many such sequences of Heads and Tails – actually 256 in all).
- HHTHTTHT
- HHHHTTTT
- TTTTTTTT
When asked about the probability of these sequences actually occurring, many people give the order 1, 2, 3. According to the laws of probability, however, each sequence has an identical chance of appearing. When asked the likelihood of a ninth Tail being thrown at the end of sequence 3, again many people believe it to be less likely than a Head. It is not. On each flip, there is a 50/50 chance of either a Head or a Tail.
Confusing Probability With Typicality
According to Piattelli-Palmarini (1994), the problem here is that people confuse the formal logic of probability with the everyday logic of typicality. The laws of probability work for very large numbers, but people are not sensitive to the large-scale patterns that these laws describe. Instead, people imagine that the ‘balance of probability’ occurs much sooner in the smaller patterns that are more typical for us.
People do not have a naturally good grasp of probability. For a particularly powerful example of this, read “How to win a Rolls Royce” below:
How to win a Rolls Royce
On a quayside are three identical containers. While you are busy in the cargo hold, I drive a Rolls Royce into one of them, walk out and shut the container door. When you return, I invite you to consider the three containers and guess which one contains the Rolls Royce.
If you get it right, you can keep the car. There is no way you can tell which one contains the Rolls Royce, so you randomly point to one. Next, I tell you I am going to open one of the other two containers – one which I know to be empty. If I know you have chosen the container with the car in, I will randomly choose either one of the other containers. If I know you have chosen an empty container, I will choose the other empty one. I make my choice and open it to show you it is empty. There are now two unopened containers, one of which contains the Rolls Royce and the other of which is empty. I now ask you if you would like to stay with your original choice, or whether you would like to switch to the other unopened container.
So, how do you maximise your chance of ending up with the Rolls? Incredible as it may seem, the answer is always to select the other container. It will contain the car twice as often as your original choice. But how can this be? Our strong intuition says that faced with two containers, there can only be a 50/50 chance that either container conceals the car. But the laws of probability do not work that way. When there were three containers, the one you chose had a one-third chance of containing the car, and the other two combined had a two-thirds probability. If one of those is revealed to be empty, then the two-thirds probability now transfers to the remaining container. Hence, it stands a much better chance of containing the car than your original choice. If you do swap your container, it may well be the empty one, but if we keep repeating the game, you will end up with twice as many Rolls Royces as you would if you stayed with your original choice!