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Perceptions of Risk

Please respond to the following:

Using the information presented in Practical Project Risk Management in Figure 6-3, “Common Influences on Risk Perception,” determine the conscious factors, subconscious factors, and affective factors for this project. Examine how awareness of such factors influences the decision to hire outside vendors. In addition, analyze how the stated factors help improve the overall facilitation and effectiveness of the risk management.

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The conscious factors that influence risk perception are:

Familiarity: The more familiar you are with a particular risk, the less likely you are to perceive it as a threat.
Manageability: The more manageable you believe a risk to be, the less likely you are to perceive it as a threat.
Proximity: The closer a risk is to you, both physically and emotionally, the more likely you are to perceive it as a threat.
Propinquity: The more likely you believe a risk to happen, the more likely you are to perceive it as a threat.
Organizational culture: The culture of your organization can also influence how you perceive risk. For example, if your organization has a culture of risk aversion, you are more likely to perceive risks as threats.

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The subconscious factors that influence risk perception are:

Heuristics: Heuristics are mental shortcuts that we use to make decisions. These shortcuts can sometimes lead to inaccurate risk assessments. For example, the availability heuristic leads us to overestimate the likelihood of risks that are easily recalled.
Anchoring: Anchoring is the tendency to rely too heavily on the first piece of information that we are given. This can lead us to underestimate or overestimate the likelihood of a risk, depending on the initial information that we receive.
Representativeness: Representativeness is the tendency to believe that things that are similar are also related. This can lead us to underestimate the likelihood of rare events.

The affective factors that influence risk perception are:

Fear: Fear can lead us to overestimate the likelihood of risks and to take unnecessary precautions.
Desire: Desire can lead us to underestimate the likelihood of risks and to take unnecessary risks.
Trust: Trust in others can lead us to underestimate the likelihood of risks that are associated with those others.

Awareness of these factors can help us to make better decisions about risk management. For example, if we are aware of the conscious factors, we can take steps to increase our familiarity with risks, to make them more manageable, and to reduce their proximity to us. If we are aware of the subconscious factors, we can be more mindful of our biases and heuristics when making risk assessments. And if we are aware of the affective factors, we can manage our emotions so that they do not cloud our judgment.

The stated factors can help to improve the overall facilitation and effectiveness of risk management by:

Increasing the accuracy of risk assessments.
Identifying and addressing the root causes of risks.
Developing and implementing effective risk mitigation strategies.
Communicating effectively about risks to stakeholders.
Managing risks throughout the project lifecycle.

By being aware of these factors and taking them into account, we can improve our ability to manage risks and make better decisions about projects.

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