Eye of the Beholder: Understanding the Psychology of Risk Perception to Improve Risk Management

Individuals perceive risks in markedly different ways. One person may consider a risk to be critical, while another could consider it inconsequential. Often rooted in psychology, these differences in risk perception can create challenges for risk professionals, especially when designing and implementing an effective risk management program. After all, if the program is focused on the wrong risks from the outset, the consequences to the organization could be dire. It is therefore critical for risk professionals to understand the psychological aspects of risk perception and develop techniques to address the resulting challenges.