1. INTRODUCTION
“Human Beings are poor examiners, subject to superstition, bias, prejudice and a profound tendency to see what they want to see rather than what is really there.” - M. Scott Peck- American Psychiatrist
Have you noticed while watching the news when you see a story like a plane crash or a ferry ship sinking, you get a feeling that you should avoid these modes of transport for a while? You feel that what if the plane or the ship you are travelling on suffers the same fate?
There is no doubt there is an element of risk while traveling through a plane or a ship but to assume that just because one plane or ship had a bad ending, it can happen again is a clear-cut case of overestimation of risk and this issue if not identified and addressed, it can definitely affect our risk assessments and future planning.
Further there is a possibility where the causes of the ship sinking, or plane crash get highlighted more and as a result they get more attention as compared to other inherent risks already present.
Daniel Kahneman, a Nobel Prize-winning psychologist, demonstrated that our brains are prone to systematic errors known as cognitive biases. These biases can distort our perception and influence how we assess and manage risks. It is important to recognize and mitigate these biases to enhance our decision-making and develop more effective risk management strategies. By doing so, we ensure that our approach remains objective, informed, and free from the pitfalls of biased thinking.
2. COGNITIVE BIASES
“The confidence people have in their beliefs is not a measure of the quality of evidence but of the coherence of the story the mind has managed to construct.” Daniel Kahneman, American Psychiatrist
Cognitive biases are errors in thinking that occur because our brains often use shortcuts to process information. While these shortcuts can help us make quick decisions, they can also lead to flawed judgments. Kahneman, along with his colleague Amos Tversky, identified many of these biases, which directly affect how we assess risks and make decisions. Understanding and addressing these biases is critical to improving decision-making and ensuring more reliable risk management.
To this blog, we shall be discussing one of the major biases which affect our daily lives and risk assessments i.e., Availability Heuristic Bias.
3. AVAILABILITY HEURISTIC AND RISK OVERESTIMATION
The human mind is a bad sampler- Amos Tversky, Israeli Mathematician
Definition: This bias occurs when people judge the likelihood of events based on how easily examples come to mind.
The availability heuristic, a cognitive bias where people assess the likelihood of an event based on how easily they can recall similar instances, can significantly influence perceptions and decisions, especially in the context of disasters such as passenger ship sinkings or flight crashes.
Passenger Ship Sinking Disaster
Availability Heuristic Impact: For shipping disasters
A) Imagery in popular media
Passenger ship disasters are devastating tragedies and deserve all the attention since they involve loss of lives. Even a loss of a single life is unacceptable and hence we need to understand and pay utmost attention as to why such disasters happen.
We all remember the infamous disaster of the Titanic, though occurred over 100 years ago it remains vivid in our memory.
Impact:
After watching the movie Titanic, you shall think twice before travelling on a ship considering the scale and the magnitude of the disaster.
Though ships have become a lot safer with the use of modern navigation systems, there is always a question as to what if something happens?
This is a clear-cut case of an overestimation of risk which can affect our judgement and decision planning.
Individuals may overestimate the likelihood of such disasters occurring again, especially when booking cruises or discussing maritime safety, influenced by the ease with which they recall these incidents.
B) Risk Perception:
Following a well-publicized ship sinking, travellers and industry stakeholders may focus more on the risks which were primarily responsible for the sinking of the ship as they were highly publicised and in the meanwhile ignoring other inherent risks already present.
Impact: This can lead to the spotlight being only on those risks which are highly visible, and in the meantime ignoring other risks which can also have a huge impact if not mitigated in time.
C) Overreaction
Example: Maritime regulators and cruise companies may implement stricter safety protocols and emergency procedures following a notable sinking incident.
Impact: While enhancing safety, these measures may also reflect an overreaction to the specific incidents rather than a comprehensive risk assessment across all potential maritime hazards.
In simple terms, if we are consistently observing fires happening in organizations via the media, other organizations may try to enhance and invest more resources in fire response protocols meanwhile ignoring other risks like floods or pandemics and if either of these materialize then it can have a catastrophic impact on the organization.
It is critically important that all risks identified need to be mitigated as per the agreed timelines. Spotlight on few risks over others can have a negative impact on the overall risk mitigation strategy.
4. MITIGATING THE INFLUENCE OF AVAILABILITY HEURISTIC
“Risk is a function of how poorly a strategy will perform if the wrong scenario occurs.” - Michael Porter- American Economist
Availability Heuristic Bias can impact risk perception and further there is real possibility of overestimating risks which have been identified along with ignoring other inherent risks which if materialize can have a negative effect on the organization.
By following the below steps organizations can possibly mitigate the impact of Availability Heuristic.
Promote Statistical Literacy: It is important to educate the employees about the actual probabilities with these events compared to other daily risks. This is important since it will ensure decisions on risks shall be based on statistical data at hand and not due to cognitive biases
Comprehensive Risk Assessment: Conduct a comprehensive risk assessment that consider a wide range of potential hazards and vulnerabilities, not just those that are most memorable or recently publicized.
Evidence-Based Decision Making: It is important to ensure new safety protocols, regulatory changes, and public policies are based on empirical data, comprehensive analysis, and expert insights rather than emotional reactions or recent media coverage.
Systematic Decision-Making Processes: Implement structured decision-making frameworks that require consideration of multiple perspectives and data sources.
Regular Risk Reviews: Conduct periodic reviews of risk assessments to ensure they remain current and comprehensive, rather than being overly influenced by recent events.
Diverse Information Sources: Encourage the use of diverse and objective information sources when assessing risks, rather than relying solely on easily recalled examples.
Scenario Planning: Use scenario planning exercises to explore a wide range of potential future events, including those that may not readily come to mind.
If Organizations keep the above steps in mind, they shall be able to mitigate the negative impacts of availability heuristic and ensure the organization has an efficient risk management strategy.
5. CONCLUSION
Organizations need to take effective decisions based on statistical data at hand rather than media coverage of the major causes of disruption. This will ensure that organizations have a comprehensive risk management strategy in place, and it shall cover all aspects of threats to the organization’s operations and not just a few which have been highlighted too much by the media.
This is critical to follow because if a materialization of a non-publicized risk occurs then it can possibly have a negative impact on the organization despite the availability of a risk management strategy.
Gorisco has a wide range of experts who are experienced in defining and designing various solutions to help organizations mitigate their risks and resolve their problems.
At Gorisco, our motto is 'Embedding Resilience,’ and we are committed to making the organizations and their workforce resilient. Reach out to us if you have any queries, or clarifications, or need any support on your initiatives.
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