Search
 
Best Practices

A Risk by Any Other Name...

Risk management decisions may require careful framing to remove the emotions and myopia of decision-makers from the equation.

By T&R Staff | Updated on June 26, 2013
062513_Kunrether_photo-2Howard Kunreuther is the James G. Dinan professor of decision sciences and public policy, and co-director of the Risk Management and Decision Processes Center, at the University of Pennsylvania’s Wharton School. He has done a great deal of research on how people make risk management decisions in both consumer and business settings.

One recent study examined the roles that consumers’ emotional states and time horizons play in decisions about whether to purchase insurance. Treasury & Risk sat down with Dr. Kunreuther to discuss the implications of this research for corporate finance and risk management functions.

T&R:  In the study “Protective Measures, Personal Experience, and the Affective Psychology of Time,” [with Ellen Peters, Paul Slovic, and others], you and your colleagues found that consumers who are making decisions about purchasing insurance have a poor grasp of how time should affect their decision-making, and that their decisions are largely driven by whether they feel positively or negatively about a subject—what you describe as “affect.” If consumer decision-making is swayed heavily by emotion, is risk management really a quantitative science in the corporate environment?

Howard Kunreuther: Today risk management has a high profile in many corporations, and enterprise risk management [ERM] is now part of the organizational culture in both large and small companies. But it will be viewed very differently depending on which organization you are dealing with. Each firm looks at enterprise risk management from the perspective of the backgrounds of the people involved and the types of activities in which they are involved. Some organizations, such as insurers or financial institutions, are concerned with quantitative information, while other companies view ERM more qualitatively.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.

Already have an account?

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Dig Deeper

Recommended Stories

Treasury & Risk

Join Treasury & Risk

Don’t miss crucial treasury and finance news along with in-depth analysis and insights you need to make informed treasury decisions. Join Treasury & Risk now!

  • Free unlimited access to Treasury & Risk including case studies with corporate innovators, informative newsletters, educational webcasts, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM publications including PropertyCasualty360.com and Law.com.

Already have an account? Sign In Now
Join Treasury & Risk

Copyright © 2024 ALM Global, LLC. All Rights Reserved.