Friday, May 1, 2015

Risk register psychology

Ever done a risk register? It's usually a matrix or table of three elements of information
1. risk impact on the one side, and
2. risk probability (or frequency) on the other side, with
3. some assessment, either qualitative or quantitative at the intersection of (1) and (2)
Fair enough.

But, as we all know, the effectiveness of just these three elements of information in driving a decision about risk -- the risk register really having no other purpose but to drive action -- is all in how the information is presented.

Enter: psychology. (The doctor will see you now)

Say it as frequency
I recently threaded though some articles on the psychology of talking about probability.

It seems that empirical studies have repeatedly shown that people are more comfortable with, and seem to accept circumstances better, when you say "5 chances in a hundred" rather than saying the probability is 5%.

"Five chances in a hundred" is a frequency construct of probability. Now, of course, if you do the math, frequency is just a ratio: 5 per 100, 5/100, .05, 1/20

But, it's not altogether just math in the mind's eye. "Five chances in a hundred" sounds 'iffy'; sounds like it might not work out; sounds like there is some risk to the outcome.
Whereas: 5% sound precise, even accurate (gasp!, there's no real accuracy in predicting the future).

And, here's the other thing: We can easily grasp an image of 5 outcomes in a "large set" of possibilities -- who's not held 5 cards from a deck of 52, etc? But, there's no real image of 5% (can you draw me a picture of 5%?)

Scale matters
It's easy to keep an image of 5 or ten items in mind; much less so when the numbers get large, so the effectiveness of the frequency image tends to break down with really large numbers

And, a 50 - 50 chance seems ok when you think about it, but 1 chance in 2 raises suspicion's that the sample is too small, whereas 50 out of 100 seems ok and in accord with experience. But, 50% seems too precise for my thinking.

Conclusion: if you want to be an effective communicator, say it with frequency

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