Risk Perception & Tolerance

The third in a series of guest posts by Karel Simpson, Corporate Risk Manager at GardaWorld. Karel’s Blog is linked in the blogroll (bottom left hand side of this page) You can read Karel’s earlier posts on ISO 31000 on this blog

Part 1

Part 2

Have you watched the home video clip shows? The likes of You’ve Been Framed? If you have you will have noticed that people do silly things and take risks that you and I (maybe) would not. Of course you may be sat smiling and thinking to yourself that you might.  This led me to examine the topic of risk perception and tolerance – to try to establish what sort of things make people tick.

I was fascinated at my ultimate findings and I plan to discuss risk perception and tolerance as I continue to study this in my own time, as a personal quest and thirst for learning to share on this blog, hoping that it is of interest to someone. So I will look to post and discuss my ongoing research as I progress, with a snippit below.

So what are the definitions that I would use for Risk Perception and Tolerance? Rosa (2003) defines risk as a situation of “an event where something of human value (including humans themselves) is at stake and where the outcome is uncertain”. Sjoberg et al.(2004) gives the opinion that risk perception is the subjective assessment of the probability of a specified type of accident happening and how concerned we are with the consequences. I think these two fit well together but perhaps would lean more with Sjoberg.

The specific definition of risk tolerance is unlike perception in that the literature tends to not be too opinionated on the specifics and is much in agreement; although the literature is heavily focused on the financial markets as an industry the definition is applicable to all scenarios.  Fox (2012) reflects on risk tolerance being the amount of uncertainty that is willing to be accepted in a particular risk category. This definition although not exactly word for word in the literature available is supported by the views of Lehmann et al. (2009).

So the big question is what can affect risk perception and risk tolerance? What do you think? We will look at this throughout the following posts and blogs over the next few weeks and months.

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