Psychology of Risk Taking Behavior

Author: Rüdiger M. Trimpop

The topic – how the psychology of risk-taking behavior works – is split into questions.

Research implications of a motivation for risks

Is there a Personality Factor when taking risks?

The sample of people does not exist out of professional risk takers (soldiers, fire brigade, police, civil protection, stuntmen, race car drivers, …) but mainly of young white men and university students from a medium-sized Canadian city.

Evidence for a general risk-taking personality trait, statistically significant, was not as strong as some theories predicted. This may be due to the sample, but most theories had comparable samples, resulting in doubt that the level of influence that personality traits may have on risk taking.

The conclusion is that risk factors of personality traits play an important role in the risk-taking behavior, but that their role is less important than that of situational factors. The results have important implications for risk-taking research and for safety measures (eg Task-specific selection and risk training).

What is our motive for looking for risks?

Most theories of expected utility considered no emotional, nor physiological components, of the positive aspects of risk taking, nor the importance of non-materialistic rewards. The RHT (Risk Homeostasis Theory) also does not regard risk (taking) as something one can desire or a pleasant undertaking, but as a purely extrinsically motivated activity with risk tolerance. However, people look for intrinsic as well as extrinsic rewards. E.g. therefore also pleasant emotions and pleasant excitement. The literature on emotion, motivation and the interpretation of such studies suggest that these factors are more effective for adressing of motivations for risky or safe behavior than important rewards, which (the latter: rewards) one obtains with more focused behavior.

The tests also postulated that the subjects generally test their limits, try their luck and risk their chances by taking risks. Nobody took a completely safe course, everyone followed some too risky reactions. This explains the intrinsic need, desire and motivation of the subjects to take risks. However, the differences between where, how and how much risk they want are large.

The conclusion is that people feel intrinsic reward for taking risks, such as hormonal pleasure experiences, stimulation of a physiological pleasure center, emotional pleasure, the experience of small differences between the desired – and the target level of risk, of the unity of action-oriented – and targeted risk-taking behavior. We therefore take risks for both the intrinsic pleasure and the extrinsically favorable benefits.

The power of incentives

Risk motivation theory (RMT) and Risk Homeostasis Theory (RHT) both state that incentives for safe behavior are a powerful motive for reducing risk-taking trends. Changes in the risk content of a situation will lead to a higher involved control and therefore to compensation behavior. Externally introduced safety benefits are virtually canceled out. External incentives for safety also manipulate the intrinsic motivation of subjects by changing the desired target level of a risk. The target level of a risk is influenced by a higher advantage of safe behavior and higher cost of risky behavior, so the subject chooses a less risky strategy.

An additional finding is that target levels are constantly adjusted according to the perception of the risk level of the subjects.

This suggests that incentives should be used for safer behavior. Social rewards are stronger than financial ones. Social incentives are more likely to trigger intrinsic motivation. The data also suggests that incentives work better than punishments to stimulate safe behavior. So “Fame” works stronger than “Fortune” or “Pain”.

This also applies to phobias: people with a phobia keep their behavior until an alternative behavior is realized that is more rewarding than the avoidance behavior with regard to feelings such as fear.

Whether incentives work most effectively on a physical, economic or social level, or if being presented as conditional for good performance or rather as opportunities in a lottery, can depend on the individual, the situation, or the culture and is worth further investigation.

How can we master and control our risk motivation?

People strive for increasing control and we adjust our behavior according to the situation / needs, even when the perception of that control is an illusion. When a situation or an illusion of a situation with more uncertainty and unfamiliarity presents itself, we become more careful, until a less risky situation presents itself.

In gambling, such as throwing a die with a 50% chance of the outcome of three or less versus a result of four or more, many engaged in some form of superstitious behavior, such as throwing harder for higher numbers, or e.g. systematically gambling for low numbers after a few times high numbers. Or assigning their success to the previous course of the day, their happiness in love, the moment of the day, etc.

Most people do not realistically perceive their own situation, but have a positively colored illusion about themselves, their skills, and their ability to control the environment. Such findings confirm the importance of involving individual perceptions of personal control, even illusory, when analyzing risk-taking behavior. They show that the perception of control, or lack of control, leads to corresponding risky or safe behavior. “Don’t worry, I’ve got it all under control” is a famous final phrase just before an accident. Giving the feeling of control with seat belts, ABS, four-wheel drive and helmets, etc., therefore leads people to riskier, ill-considered, or even careless behavior.

How do we compensate for perceived risks?

An important underlying assumption of Risk Homeostasis Theory (RHT) and Risk Motivation Theory (RMT) is the behavioral compensation for observed changes in risk content. People show compensation behavior to reduce a difference between their perceived and their desired level of risk. The risk-taking strategy variable DFO (Deviation from Optimal Response Pattern) also showed these behavioral shifts as a result of changes in the probability of punishment. This was predicted by the RMT, which states that each change results in a new perception and the target level of risk reset.

What distinguishes RMT from RHT?

RMT is based on RHT with its compensation behavior feedback loop for perceived difference between desired level and target level of risk. RHT, on the other hand, does not take into account the frequent, continuously shifting target levels of risk nor the risk-seeking tendency of people.

RMT is an extension of RHT by stating that physiological and emotional processes undergo the same compensation functions as the rational cognitive processes on which the RHT primarily focuses.

RMT states that people take risks for intrinsic rewards associated with performing risky activities, and that this process also has a compensation feedback loop.

All in all, the RMT extends the RHT with the following:

  1. a) Postulating multi-target levels of risk that require constant compensation and may never achieve a homeostatic controlled risk optimum.
  2. b) The strong emphasis on individual motivation processes, rather than collective behavior of a larger population.
  3. c) The importance of emotional and physiological aspects in the assessment and evaluation of risk-taking behavior.
  4. d) The addition of action-oriented rewards (desire for risk) to the goal-oriented rewards (risk tolerance).

Can we describe risk-taking behavior holistically?

The big difference between the RMT and other theories is that it combines many facets of risk taking in a single holistic model. It takes into account the desire to take risks, as well as the desire to control it. It involves processes that do not consciously take place, such as physiological and basic emotional processes. RMT emphasizes emotional, physiological and cognitive aspects of risk-taking, and a behavioral compensation feedback loop, designed and developed to optimize the overarching benefits of risk-taking.

The components of the ‘Risk Motivation Theory’ (RMT)

Implications of a Risk Motivation for the “Real Life”

Although it seems obvious that people are more cautious when there is great danger, this theory also implies that people voluntarily increase their exposure to danger when the perceived risk is low. This has implications for industry, traffic, health issues, and personal life. The findings teach us that if we make the environment safer, people will compensate for this increased safety by taking more risks.

Implications for reducing accidents

This is important for the design of the workplace for the reason of reducing accidents. The less active input an employee has when working with machines, the higher the chance of boredom, too little excitement and therefore compensation with risky behavior. E.g. duels with oil barrels, or races with fork lifts.

That is why it seems important to involve the employees in the design and execution of their job. The amount of responsibility that one experiences is probably proportional to the amount of risk that one experiences. Risk-seeking behavior must therefore be considered if accidents are to be avoided.

Although programs for encouraging safe behavior have some long-term effect, habituation can be expected that people simply get from the (increased) rewards, and after a while they take more risks. It can help to periodically change the nature of the rewards, and make them flexible, tailored to the person’s needs, individual needs and differences, and by using non-material incentives in addition to material ones. Praise and fame often have a greater effect on intrinsic motivation than material rewards.

Security measures, controlled and imposed by the government, may best be used in family circumstances. By learning from childhood safe behavior and rewarding them for displaying risk-conscious behavior, one could be much more effective than changing adult behavior. The same is true for forming the desired behavior of an employee from the start of employment.

Another important factor in risk-taking is risk perception. If a risk is not seen as such as a threat, one cannot respond to it as such. So recognizing danger must be learned and trained, otherwise accidents will happen anyway. An example is the difference in the handbrake-wheel combination in a bicycle compared to a motorcycle. With a bicycle, the right hand brake belongs to the rear wheel. With a motor, it is the front wheel. If this is not known, this will lead to accidents.

The insurmountable desire for challenges in our daily lives

However, one must also realize that no matter how high the reward or punishment may be, most people still take risks. After all, taking risks is important for survival, and is intrinsically and socially rewarded. Instead of eliminating all risks, one should therefore channel into equally risky actions for the individual, but which are less risky for society. E.g. taking risks with a race car are more tolerated than taking the same risks with a truck with toxic waste.

We must therefore try to let people actively choose which risks they take, and limit the situations in which they take them, as well as look for other situations or locations where and when they want to take risks. People must learn to estimate the costs and benefits of this action.

Anticipation of having fun, and the actual experience of emotions and physiological arousal are very intense under risky circumstances. The increased pleasure provides a powerful incentive to sort out situations that can give us that feeling back.

However, how much risk and intensity is still felt by someone as pleasure is subject to situational and personal differences. Testimonials show that the higher the perceived risk, the higher the pleasant excitement, and the higher the amount of energy spent on controlling the hazard. E.g. how much people think, test, buy protection and spend money to control the dangers for public figures on a race track is probably proportional to the danger for the individuals involved.

The effects of illusion of control has potentially important implications. Most of us have the illusion of control, optimism and skills. We may all be at risk to the level that we feel comfortable with. As we overestimate this level, we may all take too high risks. This has consequences for our survival as a species. Namely, if no other factor compensates for this phenomenon, we should have died out already, or this will happen soon.

A personal conclusion from the author

Given the insatiable motivation of people to do more, he hopes that our drive for more risks will be accompanied by a proportionately strong drive to master and control risks and the environment, so that one does not have to take the ultimate risk, just to to know what happens in the hereafter. Perhaps the consequences of taking that risk would ignore the optimum level of the challenge.

Natech Risk Assessment and Management – Reducing the risk of Natural-hazard Impact on Hazardous Installations

Authors: Elisabeth Krausmann; Ana Maria Cruz; Ernesto Salzano
The problem that is currently on the rise is that of technical disasters triggered by previous natural disasters or natural events. Examples include frost, heat, drought, rainfall, floods, earthquakes, whether or not combined in tsunamis, lightning strikes, etc.
In an extensive introduction, the authors give a number of examples of what these natural phenomena can do. And that is quite something: ranging from power cuts and pipe breaks, to destruction of storage tanks and explosions. These in turn give rise to an evacuation of the employees of the company, the environment, with or without death toll, as well as a possible enormous economic damage and the stagnation of (parts of) the economic activity in the affected area. It is therefore not for nothing that people want to arm themselves against the even worse domino effects of such events. To this end, these so-called Natech events are studied. To make the world a little safer.
Unfortunately, no two Natech disasters are the same. Although performing risk assessments makes progress in this regard, according to the authors, it remains (for the time being) an impossible task to compare the results of risk assessments. That makes it difficult to prioritize. Yet there are some standard works that the authors regularly refer to, among many other things in their detailed literature lists. Namely the so-called purple book, red book, green book and yellow book from TNO. But perhaps more important for their discussion are the software packages RAPID-N, PANR, the methods of TRAS 310 and TRAS 320, risk curves and ARIPAR-GIS. These contain qualitative, semi-quantitative and quantitative risk assessment modules.
After a number of chapters in which RAPID-N, ARIPAR-GIS and RISKCURVES are illustrated with discussion of the results, two chapters deal respectively with structural (technical) measures and organizational (more administrative) measures.
An innovative framework, which the authors say is worthwhile, was proposed by IRGC and consists of the following five elements:

  1. Risk preassessment: an early warning and “framing” of the risk to provide the problem with a structured definition. Or how it is framed by the various stakeholders and interested parties, and how best to deal with it.
  2. Risk assessment. By combining a scientific risk assessment (of the hazard and the probability of it) combined with a systematic ‘concern’ assessment (of public concerns and perceptions) to form the basis of knowledge for taking subsequent decisions.
  3. Characterization and evaluation: making use of scientific data and a thorough understanding of the societal values ​​affected by the risk to determine whether the risk is acceptable, tolerable (with or without mitigation of the risk as a requirement) or intolerable (unacceptable).
  4. Risk management: all actions and remedies that are necessary to avoid, reduce, share or retain a risk.
  5. Risk communication: how stakeholders and interested parties and society understand the risk and participate in the risk governance process.

The work is, in particular, a piece of “compulsory” reading material for continuity managers and risk managers of large companies that are important for the economic motor of a region or country with large industrial installations. It requires a healthy portion of common sense, but also a sufficient knowledge of process engineering to grasp the storylines. In addition, an open view of a wide range of sciences, technical and non-technical, and of society, is necessary to correctly assess the importance of this work.

Managing Outside Pressure – Strategies for Preventing Corporate Disasters

Authors: Matthias Winter; Ulrich Steger

In Chapter 1, the authors offer a historical statement of the Nobel Prize Laureate Economy Friedman from 1962: “In a free society, there is one and only one social responsibility or business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” With that, organizations became dominant in society. But more and more people believe that today the same organizations are causing much of society’s problems. This creates groups of activists and they start to exert pressure. A number of questions follow from this:

  • What is the stakeholder concept and how can they influence organizations?
  • What is the difference between a “transactional” and a “contextual” environment?
  • How do we evaluate the situation from the point of view of the organization?
  • How do we evaluate the situation from the point of view of the activists?

The authors provide answers to these questions in the course of a number of chapters.

The “Stakeholders” can be an extensive number of groups: consumers, customers, competitors, employees, shareholders, environmental organizations, local communities, local authorities, suppliers, special interest groups, owners, the media, the legislature, scientists and researchers, banks, … they all have an interest somewhere in the results and the operation of the organization.
These can be divided into two groups: the transactional environment and the contextual environment: the first has some professional business relationship with the organization. Normally they can negotiate with the management about the rules for the transaction. The contextual environment has no direct market or business relationships.

There are also activists: these can be loosely classified into environmental activists, health-related activists and socially motivated activists. That way they are mainly in the contextual environment. How can they influence an organization? The authors describe this with “Transmission belts”. The first is direct pressure of protest. A second is the search for associates in the transactional group, for example the customers. This impact can cause the organization a financial hangover. They can also find supporters in the contextual environment, for example with the legislator. They can best use both, since the clients can work flexibly in the short term, while the legislator works more decisively with regulations but more in the long term.

In chapter 3 the authors talk about “Corporate Early Awareness Models”. They state that the traditional model of the stakeholder analysis is outdated. After all, a number of things vary over time: the agendas of the various stakeholders, the importance and influence of different groups, how the organization behaves in the sector, and social values. The new analysis models try to make the difference between early identification versus a late intervention. One advantage on the first is that you can avoid the difficult things so that they are no longer relevant. The second means that you as an organization do not waste time and energy on what is not relevant. In addition, it is good to make a distinction between strong and weak situations. Strong situations are best identified early, while weak situations can usually be dealt with later on. The strong situations run the risk of going through the following stages:

  • “concern”
  • “issue”
  • “crisis”
  • “scandal”

Because it can become a “scandal”, it is necessary to intervene quickly. Weak situations do not usually reach this final stage.

To make a difference between a “strong” and “weak” situation in a systematic way, the tool has been proposed by the authors, from the perspective of the organization. This covers the following eight sections:

  • Are the arguments against the issue plausible?
  • Does the issue cause emotion? Is this understandable – visually and touching – to the public?
  • Is the issue media friendly?
  • Are there links with other issues of the organization or of other involved organizations or within the sector?
  • How strong is the “key” activist group?
  • How isolated is the organization?
  • How far have the dynamics of the crisis already developed?
  • How easy is it to find a solution?

To complete their “world view”, however, the organizations also need a picture of the situation through the eyes of the activists. Which factors make the situation “attractive” for them? And for which type of campaigners? For this, the authors brought the activists into four groups along two axes. First: integrating versus polarizing. Do they integrate the role of the business and the public interest in their own system of objectives or not? Integrators place a high priority on developing a productive win-win relationship with the business, while the polarizers simply push through their minds and do not cooperate with the organizations. The second axis shows whether the action group discriminates between organizations within an industry with regard to a genuine or perceived commitment of the organization to environmental issues, health issues or social issues. “Discriminators” look at the progress of the organizations with regard to benchmarks in their sector. The non-discriminators focus on the problems that the organizations and entire industries cause, without distinction between the good guys and the bad guys. These four groups have their own modus operandi.

  • Sharks arbitrarily attack organizations. They are not very organization-specific in their target and are generally harmless to individual organizations.
  • Sea lions are usually even less dangerous for organizations because they tend to only address weak situations and discussions about social values ​​in general.
  • Dolphins focus more on a single situation and work with the organizations to find a win-win solution.
  • The really dangerous activist groups are the orcas. They isolate the organization and humiliate them in public for their sins. They choose symbolic situations and use a lot of symbolism in their campaigns.

The authors’ research shows that most activist groups, but especially orcas and dolphins, have a collection of guidelines for when to engage in a situation.

When a situation meets the requirements of this or a similar list, the danger of a confrontation increases:

  • The campaign must have a clear goal.
  • The issue must be easily understood by the general public.
  • The issue has a symbolic value.
  • The issue has the potential to damage the image of the organization.
  • The opponent is strong enough (no “underdog” effect).
  • The issue can be packed in a campaign in which the public can be involved.
  • There are solutions that are confrontational, not gradual (political concepts, management concepts, product or process concepts, that are competitive in terms of price and quality).
  • There must be a drama element to the campaign to engage the media.

In chapter six the authors give a number of tips and examples of the application of these checklists. A possible template for a signal description of an upcoming issue includes a place for the following questions:

  • What is the issue?
  • Who is affected? (Internal? External?)
  • Who discovered the situation?
  • When did the signals occur?
  • Where did the signals occur?
  • What are the signals that have occurred?
  • Why can this become an issue that is relevant to the organization?

In Chapter 7, the authors present nine cases of issues that occurred, or were to act potentially in the near future at the time, arguing that the model works.

In chapter eight, the authors indicate that the organization always has the choice between two options:

  • Drop the project / action.
  • Carry out the project / action anyway.

In addition, they provide advice in both cases.

A possible template for these tools can be found in the attachment.

Firearms Acquisition By Terrorists In Europe

Research findings and policy recommendations of Project SAFTE

Authors: Nils Duquet; Kevin Goris
In this book, the authors provide an overview of the knowledge regarding the purchases of weapons in the EU by terrorists. This is a phenomenon that deserves a lot of attention because it has been shown in the recent past that this is “in our back yard”. After every terrorist act there are a multitude of questions from the population. Not only why this happened, but also how this could happen is regularly asked. This book tries to chart the share of the “arms market for terrorists” in the “how” of these questions.
In the first chapter the authors deal with legislation up to 2017. This discussion of the legislation on arms sales shows that the EU still has a lot of work to coordinate between the countries in order to remove legal loopholes concerning arms transports and arms sales.
In the second chapter, the authors discuss the illegal arms markets in Europe itself. This shows how difficult it is to have an overview of something that seems simple, namely how many illegal weapons are there in Europe? The estimate ranges between 81000 and 67000000. Difficulties in making estimates include closed markets, but also the increase in available military grade weapons on illegal markets. Include illegal production, theft and reactivation of deactivated antique weapons, and you will get an unclear picture.
In the third chapter, the authors discuss the accessibility of the arms markets for terrorists. That appears not to be that simple. The arms markets are a closed market. If you already have criminal offenses on your record, you are known and trusted. Moreover, the arms dealers are not as keen on selling weapons if they know that the aim is to commit a terrorist attack. In addition, it appears that these markets are not a single market. Procurement methods differ depending on whether they are separatists, religious terrorists, right-wing terrorist groups or left-wing terrorist groups.
In the fourth chapter, the authors provide a number of policy recommendations with regard to the countries and the EU. This includes a coherent approach to regulation. But they also provide operational advice, such as exchanging data, uniform data storage, collaborating on data analysis, monitoring the implementation of legislation, applying strict penalties … Collaboration with citizens has not been forgotten, by the possibility of them voluntarily turning in their weapons. In addition, they also have an eye for the capabilities to be built in the nations, international coordination and cooperation. Finally, they indicate the following risks to follow up:

  • The increase in available military-grade weapons,
  • The spread of firearms from legality into illegality,
  • The role of weapon collectors and enthusiasts, and handymen,
  • Arms transactions on the internet,
  • The future of 3D printing.

 

 

Action Plan against Disinformation

European Commission contribution to the European Council – December 5th 2018

The starting point of this contribution is that free speech is a core value. The citizen must be able to have verifiable information freely. They need this in order to be able to correctly inform themselves about the wide range of political issues and positions. This democratic process is threatened when disinformation mixes things up.

What is the problem?

Disinformation is understood in this document as information that can be verified as being false or misleading. It is created, presented and disseminated for economic gain, or to mislead the public intentionally, and may cause harm to that public.

This is intended to include threats to democratic processes as well as public health, public safety, the environment or public security.

The action plan responds to the European Council’s question of measures to protect the Union’s democratic systems and to defeat disinformation, including the context of the emerging European elections.

Understanding the threat.

An increase of targeted disinformation campaigns against the Union, its institutions and its policies,  is expected, in the run-up to the European elections of 2019. It uses deep-fakes (video manipulation) counterfeits of official documents, bots (automated software), trolls (false profiles on social media) and information theft. Also the traditional, classical, media continue to play a role. The tools and the techniques change quickly, therefore the response must also be done quickly.

Four pillars for ten actions by the Union in response to disinformation.

Actions against disinformation require political decision-taking and cooperation, across Governments (using counter-hybrid threat, cyber security, information and strategic communication communities, data protection, electoral, Legal and media authorities).

The Four pillars are:

  1. To improve the possibilities of the Union’s institutions to detect, analyse and denounce disinformation;
  2. Strengthen collaborative response against disinformation;
  3. Mobilising the private sector to remove disinformation;
  4. Raising awareness and improving social resilience.

Pillar 1: Improving the possibilities of the Union’s institutions to detect, analyse and denounce disinformation.

Action 1: To strengthen a number of Strategic Communication Task forces with specialized staff in data mining and analysis to process the relevant data. It considers also additional media monitoring services for the many language areas Europe has. In addition, we also need to invest in tools to process these data and conduct assessments.

Action 2: The mandates of the strategic communication Task forces for the western Balkan countries and the southern countries will be reviewed, also in order to effectively address misinformation. Member States should further enhance their national capabilities, including in terms of support for the Union with employees.

Pillar 2: Reinforcing collaborative responses against disinformation.

Action 3: A RAS (Rapid Alert System) is developed and put into use. This RAS should work closely with services from the Member States that are reachable 24/7.

Action 4: An increase in communication efforts on the values and policies of the Union, with a view to the forthcoming European elections. The Member States must also make this effort.

Action 5: The Commission and the High Representative, together with the Member States, will strengthen their strategic communications in the Union’s environment. This is done among other by sharing information, sharing in the lessons, raising awareness, proactive reporting and research to strengthen and share information.

Pillar 3: Mobilising the private sector to remove disinformation.

Action 6: The Commission monitors closely and continuously the implementation of the Code of Practice by its signatories. Where necessary, and in the light of the impending elections, the Commission will insist on a swift and effective compliant implementation. To this end an assessment will take place. If this ‘ Code of Practice ‘ proves insufficient, the Commission may propose further actions, including legal proceedings.

Pillar 4: Raising awareness and improving social resilience.

Action 7: In the longer term, targeted campaigns will be organised for the wider public, as well as training for the media and opinion-makers in the Union and its environment. This is aimed at facing the negative effect of disinformation. Efforts will be taken by independent media and quality journalism as well as the investigation of disinformation to provide a comprehensive response.

Action 8: Member States together with the Commission should provide teams of multidisciplinary independent fact-checkers and researchers with specific knowledge of local information, to detect disinformation campaigns on, among other, social networks and digital media.

Action 9: Actions will be taken on the media literacy of the public. Member states should also make rapid use of provisions of the Audio-visual Media Services Directive.

Action 10: Member states must ensure an effective follow-up of the ‘ Elections Package ‘, in particular the ‘ Recommendation ‘. The Commission will monitor this and provide support and advice where appropriate.