Risk: Current to future

Synopsis: People prefer ‘risky’ situations to those they consider unknown.


Effective decision-making is hard, as clearly apparent in the global forum. Many of today’s problems result from decisional errors of the past.


Decision steps

The decision making process should logically follow certain steps:

• Defining the current problem
• Analysing the problem
• Developing alternative solutions
• Evaluating alternatives thinking future
• Selecting suitable action contextually
• Implementing the decision
• Following up on action
• Receiving feedback
  

Considering both current needs and future uncertainties helps gear decisions towards the future where their effects will be felt. But people under pressure to perform tend to focus on current outcomes, leaving the future to take care of itself. The variables overlooked generally interfere in time, with goals.

Uncertainty

The new millennium has forced environmental change that includes:

• World disasters
• The general economic climate
• Globalization
• Male/female dynamics

Uncertainty is a part of the new reality. Survey studies conducted even before the current recession showed that more than 50 percent of the companies surveyed were undergoing major changes most of the time, and two out of three people felt a constant uncertainty.

The push for twice the work in half the time, flatter organizations, downsizing and outsourcing, made lay-offs a regular happening through the 1990s. The economic recession begun in the West is now causing massive losses of investments, jobs and even homes in many parts of the world. Work related stress is on the rise – on employees who have to leave, but perhaps more, on those who remain.

Go-getting

People try to deal with the stress by taking more risks. Traditionally, risk taking has been the hallmark of the aggressive businessperson, the fearless buccaneering spirit that achieves the impossible against all odds. Americans, for example, have long been considered “a nation of risk takers” with natural go-getting talent to do anything.

But indiscriminate risk taking actually means “short-circuiting” the decisional process – gambling, in other words. Thus people become unaware of or ignore the uncertainties/challenges of the environment, and of time. The resulting over-stimulation of the reward centres of the brain leads to anticipating the pleasures of immediate success. Much of today’s economic meltdown has resulted from such aggressive overreach.

Two networks

In studies were conducted with experimental betting games, the players could choose bets on two different card decks. One, labelled ‘risky’, contained identified odds. In the other labelled ‘ambiguous’, risks were unidentified. Researchers observed that people prefer to bet on the ‘risky’ deck, and tend to avoid exploring the unknown represented by the ‘ambiguous’ .

Recordings of brain activity showed two distinctly different networks activate in the brain in situations perceived as ‘known’ and ‘unknown’. Player perceptions of the situation is important in determining which specific network is activated.

In situations perceived unknown, twenty-four brain centres are activated including intelligence and emotions. Obviously it takes time and effort to understand and identify challenges. Where risk is perceived already identified, only the reward centres in the brain comes alive with anticipation of a lucky strike.

Cont’d 2…relying on habit