Risk Attitudes and Perceptions

Question 1

Risk Attitude

Answer 1

Chosen response to uncertainty that matters
(risk), driven by perception. Risk attitudes are
personal and situational and are adopted by
individuals and groups. Risk attitudes exist on
a continuous spectrum, but common labels for
specifi c attitudes on the spectrum include
risk-averse, risk-tolerant, risk-neutral, and risk-seeking.

Question 2

Risk Averse

Answer 2

A response to the perception of a
risk that reflects discomfort with
the uncertainty and a desire to
avoid or reduce threats and exploit
opportunities to remove uncertainty.

Question 3

Risk Tolerant

Answer 3

A response to the perception of
a risk that reflects tolerance of
the uncertainty with no strong
desire to respond to threats or
opportunities in any way.

Question 4

Risk Neutral

Answer 4

A response to the perception of a risk
that reflects discomfort with uncertainty
in the long term and therefore a
willingness to take whatever short-term
actions are necessary to deliver a certain
long-term outcome.

Question 5

Risk Seeking

Answer 5

A response to the perception of
a risk that reflects comfort with the
uncertainty with no desire to avoid
or reduce threats or to exploit
opportunities to remove uncertainty.

Question 6

The Triple Strand

Answer 6

Used to represent the triple influences
on perception and risk attitude of
a) rational situational factors,
b) subconscious heuristics or
cognitive biases,
c) visceral emotions.

Question 7

Situational Factors

Answer 7

Factors in the current environment
that effect the way that individuals and
groups perceive uncertainty and risk.
Examples include experience, perceived
manageability or proximity (closeness
in time).

Question 8

Availability Heuristic

Answer 8

A mental short-cut that gives
more significance to data that
is easily recalled, thus potentially
biasing judgement.

Question 9

Representativeness Heuristic

Answer 9

A mental short-cut that gives
more significance to data that
matches a stereotype, thus
potentially biasing judgement.

Question 10

Anchoring & Adjustment

Answer 10

A mental short-cut that gives too much
significance to data that is suggested
to us, or remembered by us. We adjust
from the anchor rather than considering
the situation afresh, thus potentially
biasing judgement.

Question 11

Confirmation Trap

Answer 11

A mental short-cut that gives
more significance to data that
fits a pre-formed explanation,
thus potentially biasing judgement.

Question 12

Affect Heuristic

Answer 12

A mental short-cut that serves
to seek pleasure or avoid pain.
Without rational modification
this can lead to irrational risk
attitudes being adopted.

Question 13

GroupThink

Answer 13

A mode of thinking that people
engage in when they are deeply
involved in a cohesive group,
often biasing judgement as they
avoid confrontation rather than
‘speaking out’.

Question 14

Moses Factor

Answer 14

An effect where a group subconsciously
follows the example of the leader and
adopts their preferred risk attitude
even if it contradicts with their
own perspective.

Question 15

Cultural Conformity

Answer 15

A mental short-cut that serves to
speed up decision-making by adopting
the prevailing cultural norms
without question, thus potentially
biasing judgement.

Question 16

Power Distance

Answer 16

The extent to which people accept
and expect power to be distributed
unequally. One of the dimensions of
national cultural differences reported
by Hofstede.

Question 17

Uncertainty Avoidance

Answer 17

The extent to which a culture infl uences
its members to feel the need to seek
certainty (avoid uncertainty). This does
not correlate directly with risk-aversion.
One of the dimensions of national cultural
differences reported by Hofstede.