IMG_20141101_143650Emerson once said that “man is a god in ruins.” Whether we go so far or not, risk management is premised on the fact that humans are not divine, all-knowing, or all-powerful. In fact, people make predictable errors. We don’t always think clearly, and we try to escape blame. This is why organizations need risk management: separately, we make errors and fail to see opportunities. With a structured process, however, we can decrease the threats and increase our opportunities.

Predictably Irrational and Exculpatory. Two of the best practical books on human irrationality are shown below.

41yAjscm1XLMistakes Were Made But Not By Me

The book by Richards Heune, The Psychology of Intelligence Analysis, is an excellent discussion of the way the brain works and how it leads to analytical errors. It is totally free: you can find a PDF of it on the Internet right here. The other book, Mistakes Were Made (but not by me), is an accessible, research-backed compendium of reasons why it is very hard for human beings to accept responsibility. (Anyone interested further in this topic could explore Dan Ariely’s excellent online course on irrationality on Coursera the next time it becomes available.)

Poor Individual Risk Assessment. Human beings are particularly bad as individuals at assessing risks. David Ropeik and George Gray, in their 2002 book Risk, catalog many of these repeating errors. Some examples:

  • We are more afraid of new risks than old ones.
  • We are more afraid of “artificial” risks created by humans than “natural” risks caused by nature. Thus, we are terrified of radiation from cell phones and nuclear plants, but walk around all the time without sunscreen, relying on a thinning ozone layer to protect us from solar radiation that is much more likely to kill us than our smart phones and power plants.
  • We are more afraid of risks that are imposed on us than those we accept willingly.
  • We discount risks that include benefits. We drive. We drink. We drink and drive. We live in earthquake zones and highly congested cities. Why? Because these risky activities provide financial and psychic benefits.
  • We worry more about scary risks than boring risks. As Ropeik and Gray observe, “[P]eople are more afraid of risks that can kill them in particularly awful ways, like being eaten by a shark, than they are of the risk of dying in less awful ways, like heart disease—the leading cause of death in the United States.”

In short, as individuals we often fail to think clearly, especially when it comes to risk. In our next post, we will talk about some of the problems caused by poor risk assessments.

Please share this post if you found it useful. We are out to change how organizations think about threats, opportunities, and risk management, and we need your help.

Please follow and like us: