BUSS 5292 Current thinking on risk 代写
100%原创包过,高质量代写&免费提供Turnitin报告--24小时客服QQ&微信：273427
1 BUSS 5292 Current thinking on risk 代写
Risk Management
BUSS 5292
Topic 2
Current thinking on risk:
Implications for managers
1
Course Facilitator: Kesten Green
Study Period 1, 2016
Dealing with risk:
20 th Century perspective
The aim of science is to predict the
future for the purpose of making
our conduct intelligent.
Frank Knight, p 16. RUP.
4
Use findings from scientific research
for risk analysis and management
Technical risk assessment
Ø Use evidence from history & experimental studies
Types (from Renn 1998)
q Actuarial
(e.g. Analysis of statistical records)
q Environmental
(e.g. Toxicological & epidemiological studies)
q Technological
(e.g. Judgmental “fault trees”)
5
2
Limitations of technical analyses:
Why only expected physical harm?
“Confining undesirable consequences to
physical harm excludes [from analysis]
other consequences that people might
also regard as undesirable,
but physical harm may be the only
consequence that (almost) all social
groups and cultures agree is
undesirable”
Renn (p.54, 1998)
6
Psychology and Sociology of risk
§ Heuristics and biases of individual risk
attitudes, intuitions, and perceptions
(Kahneman, Tversky, Fischhoff, et al.)
§ Diverse understandings of what “risk” is
§ Poor decisions under risk
§ Social and cultural group differences in
perceptions of risk and trade-offs vs other
values
§ What implications for risk management?
§ Costs vs benefits of efforts to accommodate
diverse perceptions?
7 BUSS 5292 Current thinking on risk 代写
Losses versus gains:
What we now know on prospect theory
§ Kahneman & Tversky (1979) proposed prospect
theory as an alternative to expected utility theory*,
implying people are more averse to losses than
attracted to gains.
§ Armstrong (p. 304, 2010) describes the failure of
researchers to identify conditions when loss-framing
is more persuasive than gain-framing.
§ Levy & Levy (2002) presented evidence that there
is no such problem when more realistic choices are
offered.
*On which, more later.
8
3
Conservatism and base rate neglect,
or problem framing?
Q. The problem of revising probability estimates
in response to new information*, do you…
A. Not revise (stick to “base rate”, a.k.a. historical
“relative frequency”)?
B. Ignore base rate (use new information only)?
C. Something in between?
A. Depends on framing and familiarity of the
problem (Gigerenzer et al. 1988).
*E.g., You see a picture of your lecturer. What is the probability he
was born in Australia? You hear him speak…
9
Different perspectives on a current risk
management issue
Too many people in the corporate sector are still in
denial about climate change, according to Katherine
Garrett-Cox, the CEO of investment firm Alliance
Trust. Speaking at a Guardian Sustainable Business
debate on the role of business in tackling climate
change, she said: “Within the last 12 months, I’ve
had conversations with CEOs of major corporates in
Europe and they just say, ‘It’s not real, it’s not
something I should be bothered about’.” It is “scary”
how little discussion there is at boardroom level
about whether climate change is a risk at all, she
added.
Emma Howard, The Guardian, 15 January 2016
10
Different perspectives on a current risk
management issue, II
The greenhouse effect raises the Earth's temperature by
about 40ºC above what it would otherwise have been.
Without the greenhouse effect the Earth would be locked
into a permanent ice-age. This fact gives the lie to those
renegade scientists, who in their anxiety to get their hands
into the public purse, are seeking to persuade the public that
the greenhouse effect is a bad thing greatly to be feared.
The reverse is true. The greenhouse effect is an exceedingly
good thing, without which those of us who happen to live in
Britain would be buried under several hundreds of metres of
ice.
Hoyle & Wikramasinghe (1999) CCNet
http://abob.libs.uga.edu/bobk/ccc/ce120799.html
11
4
Economics to the rescue!
Markets and “expected utility”
§ Allows comparison of options
§ Includes individual perceptions of value of
non-physical (social) aspects
How?
§ Via prices
(e.g. how much extra would you pay for: “Organic”
food? Non fossil fuel energy? A safer car?)
§ How much to pay to reduce the expected harm or
increase the expected benefit?
12
Economics to the rescue, II
When others are affected
Are there situations where markets cannot
ensure efficient allocation of resources?
§ Externalities
§ Common pool resources
§ Public goods
But are these truly exceptions?
And is any alternative better?
13
How to deal with risk:
20 th Century perspective
This is the way our minds work; we must
divide to conquer. Where a complex
situation can be dealt with as a whole—if
that ever happens—there is no occasion
for "thought." Thought in the scientific
sense, and analysis, are the same thing.
Frank Knight, p 16. RUP.
14 BUSS 5292 Current thinking on risk 代写
5
How to deal with risk:
21 st Century elaboration on conditions, I
Decomposition (“divide to conquer”) can
simplify a complex problem
But that only helps if the parts can
be better analysed that the whole
15
How to deal with risk:
21 st Century elaboration on conditions, II
Simple methods provide more realistic
analysis (more accurate forecasts) for
complex uncertain situations than do
complex ones
Green & Armstrong (2015)
16
How to deal with risk:
21 st Century elaboration on conditions, III
Commonly used heuristics (“rules of
thumb”) are superior to complex analytical
methods for many complex and uncertain
situations [Gigerenzer]
But whether or not they are superior
for a particular type of situation, and
whether or not they are superior to
simple evidence-based alternative methods
…are empirical questions.
17
6
Examples of heuristics
• Take the best
• Recognition
• Simple hiatus rule
• Your examples…
18 BUSS 5292 Current thinking on risk 代写
How to deal with risk:
21 st Century elaboration on conditions, IV
Are there complex situations that can be best
assessed without “thought”?
i.e. “intuitions” of the unconcious mind
Relevant experience?
As “alerts” to possible opportunities and
threats?? – i.e. Look again?
19
How to deal with risk:
21 st Century elaboration on conditions, V
What about “black swans” and the
limitations of induction and
predictability?
• Inductive turkey vs poor framing
• Markets, statistical analysis, and
bubbles
20
7
Risk management versus risk avoidance
§ In a world of scarce resources, resources… and risks,
must be allocated
§ Trade-offs are unavoidable (What are you willing to
give up?)
§ Unintended consequences (costs and risk
redistribution) of safety (risk reduction) regulations
§ No limit to risks that can be imagined, therefore costs
§ Collectivization of risk vs individual choice, trial & error
§ Redistribution of resources towards elites
See Wildavsky (1979)
21 BUSS 5292 Current thinking on risk 代写
