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23 February 2007

Risk and Decisions making

Scientists have scanned people’s brains when making risk decisions. The bottom line is that while there is great diversity in people’s risk taking behaviour, generally people are more averse to loss than they are in favour of gain through risk taking behaviour.

Read this article on the study and think about the implications this has on project risk management. If people are fundamentally risk averse they are likely to want to maintain the status quo – better the devil you know. How does that affect the way you do your job of managing in changes in an uncertain environment?

My view; It explains much of the risk related behaviour you see from subject matter experts and operations management in less mature organisations. This is the scenario where as soon as a risk comes up people want to close the project.
Risk management methodologies such as those described last month in this blog can manage people through what appears to be their natural bias to an objective appraisal and management of the situation, meaning that problems get the attention they deserve and are not blown out of proportion or trivialised and ignored.