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How do you perceive risk

In Finance, Insurance, Risk Management on May 7, 2012 at 1:38 pm

Risk perception is the subjective assessment of the probability of a specified type of accident happening and how concerned we are with the consequences. To perceive risk includes evaluations of the probability as well as the consequences of a negative outcome. It may also be argued that as affects related to the activity is an element of risk perception.

how do you perceive risk

Perception of risk goes beyond the individual, and it is a social and cultural construct reflecting values, symbols, history, and ideology.” (Weinstein, 1989).

Risk Perception follows from the specificity and variability of human social existence that it should not simply be presumed that scores and ratings on identical instruments have the same meanings in different contexts” (Boholm, 1998).

Adams (1995) claimed that “the starting point of any theory of risk must be that everyone willingly takes risks”. He concluded that this was not in fact the starting point of most of the literature on risk.

Dodd and Mills, 1985 developed model FADIS (fear of accidental death and injury scale)

There is various perception of risk by key decision maker in insurance organization.

  • Risk perception for human factor – Some financial directors does not consider risk management importance, some consider it very seriously and spend lots of money in buying insurance. Some takes it as financial burden and in other cases it is out of his scope.
  • It depends upon Organization culture and competency.
  • Financial strength and scale of organization is key factor in determining level of loss. Example furniture manufacturing Organization is having higher risk of fire than a Software company.  It is very much possible that a Company like Microsoft, CSC has big risk management department because of its size rather than a small company which even might exposed to higher risk.
  • Culture of market place:  In Dubai, most of insurance company and banks have risk managers and Heads and follow most of the international standards if we see same in India, very few organization have them.
  • Flexibility: Flexibility within an organization that will enable it to meet urgent needs also taken into consideration.
  • Future effect of risk on various activities of organization also needs consideration