Motivation and emotion/Book/2017/Risk assessment and emotion
What role do emotions play in risk assessment and decision making?
- 1 Overview
- 2 Risk Assessment and Decision Making
- 3 Emotion
- 4 How Emotion can Affect Assessing Risk?
- 5 Emotional Intelligence and Risk Assessment
- 6 Conclusion
- 7 See Also
- 8 References
The research of emotional effects on decision making has developed significantly in past century. There are many areas of research into risk assessment and effects of emotion that are of much interest today. Further, understanding of how emotions influence our assessment of risk could provide many opportunities to improve understanding of our motivations and emotions in our lives.
- Risks - something that can potentially be harmful or create a loss
- Emotion - short lived, feeling-bodily responses that help us to adapt to opportunities and challenges we face during important life events (Reeve, 2018)
Risk Assessment and Decision Making
What is Risk Assessment and Decision Making?
Risk assessment, as defined by Towl (2003), is the "dangerousness" or cause and effect of a decision made by an individual. It is where someone actively assesses a situation (or list of situations) and identifies different outcomes and potential risks associated with the task.
Decision making is the end process of risk assessment. It is the point of where the individual has assessed the situation and is choosing which option to take. However, decision making can be made without risk assessing beforehand. For example, you wouldn't need to determine what are the risks of wearing a blue shirt with white stripes or a white shirt with blue stripes; you would just choose whichever one you want (unless you were worried about being mistaken about being a sailor by wearing the white shirt with blue stripes, so you would wear the blue shirt with white stripes instead). This is due to risks generally only being associated with a situation where a negative outcome could occur .
Risk assessment isn't only used in day to day life. Companies and businesses tend to have a major focus on risk and risk assessment. This is called commercial risk. It helps businesses react accordingly in case potentially harmful situations occurs (e.g., what do we do if a virus enters our computer systems, or how can we prevent people over working and creating fatigue). For further information on commercial risk, see Risk Management.
Theories and History about Risk Assessment
The scientific field of risk assessment is still relatively new. The most significant developments into this field have been in the past few decades. The ancient Athenians theorised about risk-assessment in decision making over 2400 years ago. the more recent progress in the literature in the past 40 years (Aven, 2016). Although this discipline is only 40 or so years old, there has still been major progression in this time. This can be seen through various business, schools, community groups and organisations implementing risk assessment as part of their training or having specific groups dedicated to assessing possible risks in aspects of their workplace/business. Also with advancing technology it is easy to access websites that give guidelines and examples for researchers or business to understand what may and what may not be risks associated with their practice. Websites such as Australian Risk Services is a perfect example of this for Australia and similar sources exist for other countries for various disciplines.
Theories and History about Decision Making
The history of decision making is much longer and extensive. The term "decision making" was first ascribed to a telephone executive named Chester Barnard who introduced the term from public administration terms to businesses (Buchana & O’Connell, 2006). The introduction of this new term meant that it replaced other terms such as "policy making" which people deemed as being more appropriate. This was because the term "decision making" felt as though there would be an end result whatever the circumstance as "policy making" did not. From here there was a lot of focus on economic decisions (or economic theory) and an interest in financial decisions. This is the prediction of a decision based on a money aspect (i.e., having $20 and no t-shirt or $10 and a t-shirt) and the impact of that decision (Edwards, 1954). From here there were various theories created as different disciplines, such as psychology, politics and social scientists, took up research into this aspect of human mind and conscience.
Two main theories around decision making are: normative decision theory and descriptive decision theory. Normative decision theory was believed to have been developed by Victor Vroom from his focus on leadership and decision making. This theory is used to deduce the most rational and logical decision for a task; what "should" happen. This design (as developed by Victor Vroom) can be used for leadership-focused environments and consist of five different decision-making processes:
- Decide – where the leader makes the decision for the group
- Consult (individual) – the leader approaches each group member individually to seek out ideas/options then decides based on what approach the leader thinks is best
- Consult (group) – leader asks the group and through group discussion creates a decision
- Facilitate – leader asks the group and presents their idea as well, gives equal weighing to all options
- Delegate – the leader takes no action in the decision-making process except providing encouragement and useful resources
This model predicts the effectiveness of decision-making procedures which is helpful in organisations and management styling and teaching.
Descriptive decision theory (or positive description theory) is concerned with how people make decisions. This theory is very heavily experimental based with a focus on how and why people make decisions. From here there has been theories such as the regret theory (finding ways to minimise regretful decisions) and prospect theory.
The prospect theory was devised by Tversky and Kahneman in 1986. It contains two stages; the framing phase of the risk and valuation phase of a risk. The framing phase is when the individual assesses the situation and draws possible outcomes. During the valuation stage the individual investigates each possible outcome and the pros and cons. From here a decision is made by the individual.
There have been other versions of the prospect theory that researchers have created. One of which is the cumulative prospect theory revised by Tversky and Kahneman (1992). Cumulative prospect theory is like the prospect theory except it also incorporates that each decision may have a finite number of circumstances surrounding the decision. It also takes into account five major phenomenon of choice that have been verified through experimental processes. The five are as follows:
- Framing Effects
- Nonlinear preferences
- Source dependence
- Risk seeking
- Loss aversion (Tversky & Kahneman, 1992)
The regret theory was created by Loomes and Sugden (1982) and was created to present an alternative to prospect theory (which was initially quite complex). Loomes and Sugden wanted to create an alternative theory that investigates a finite number of alternative states of the world where any one could occur (Loomes & Sugden, 1982). The regret theory investigates how an individual when making a decision has to choose between a number of "actions", where each action also has a number of consequences. This is different to prospect theory as instead of only having a pair of options to each prospect, there can be multiple consequences associated with each action that can also link other actions. As can be seen, regret theory is very similar to the cumulative prospect theory that was later developed by Tversky and Kahneman though regret theory took into account emotional effects.
Although there has only been a select few theories presented, see decision making theories for a further in depth insight.
Emotion research is a complex field and there are many variables in individual feeling and expressing emotions. Though general concepts of emotions stay constant cross-culturally, the specifics intertwined with an individual’s personality remain different and complex.
What is Emotion?
Emotion is the feeling expressed by an individual due to an external or internal stimulus (e.g., feeling happy because you remembered that it's your birthday). Emotions are a cognitive activity meaning that they can are directly related to brain activity. This has been found in several studies determining the different parts of the brain responsible for different emotions. Brain scans such as EEGs are tools used by neurologists and psychologists to investigate this aspect of cognition. These tools are also used in investigating autism spectrum disorder and seeing whether people with this disorder have difficulty in processing emotions. In a meta-analytic study by Uljarevic & Hamilton (2012) they investigated 48 papers and a total of 932 patients with autism spectrum disorder. Overall, they found that there was marginal evidence that there were significant differences for happiness and more so for fear. Though finding from this study are could still be influenced by other facts (that were tested in all studies) such as IQ, age and emotions tested. From researching brain damage or brain incisions, it has been found that the amygdala can be responsible for processing emotion. Aldolphs, Baron-Cohen and Tranel (2002) looked into recognition of social emotions (emotions presented from others) with 30 subject that had some sort of amygdala damage (unilateral; left, right or bilateral), 47 controls (any form of brain damage) and 19 regular controls (no known brain damage). They found that there was a significant difference for the participants with unilateral or bilateral amygdala damage and their ability to recognise social emotions. Theses participants were less likely to have any recognition of social emotions more so than basic emotions.
How Emotion can Affect Assessing Risk?
There is a deep and complex relationship that underlies the effect that emotions can have on risk assessment and decision making. This is due to the complexity of emotion itself, the variability of risks and what they could mean to the individual. In general, it is understood that a positive mood can possibly result in a positive assessment of risks and a negative mood can result in a mixture (Angie, et. al, 2011). However, as research has developed in this field, researchers have come to find that there is more than just whether someone is happy or sad when undergoing a decision. There is a wide variety of emotions and different degree of emotions that can pay a part in risk assessment and decision making. In a study by Angie and authors (2011) they considered discrete emotions (emotions that arise from a short-lived event/stimulus) and the way that they can potentially affect risk assessment. The discrete emotions that have been considered by other studies (Lerner et. al, 2015) have only looked at the discrete emotions as a whole (anger versus fear) but not into how since they are completely different emotions that there are different mental associations around it. Lerner and authors (2015) conducted this study through a meta analysis and found that discrete emotions did have an effect on judgement and decision making . However, since this study was a meta-analysis there were differentials in study design that could have impacted the overall results of the study . There was also enough evidence to provide a basis for further development on this topic .
There are various factors that can affect an individual and their emotional impulses on risk assessment. Such factors include (but are not limited by):
- Peers (see peer pressure)
- Coping mechanisms
- Financial status
There are various external factors that can influence someone's emotional reaction to choice, which can be positive or negative. In a study by Wright and Bower (1992) who looked into how the mood of participants affected their outlook on decisions. It was found that sad participants were more likely to think that negative consequences would occur than happy participants, who believed that a positive consequence was more likely. Being completely positive may not necessarily be the best in all decisions though. Nygren and authors (1996) found that positive participants tended to overestimate the possibility of a positive event happening compared to a control. It has also been found that negative people are more likely to take risks than their positive counterparts (George & Dane, 2016). Though in all of these situations, even though the results were significant, it is still difficult to determine whether their mood was the complete deciding point for the individuals or if other factors could have influence on the results that were not tested (George and Dane, 2016) .
Out of all emotions the most popular in terms of research in decision making is regret. This is due to it being the first most notable reaction before and after a decision is made. Regret is involved in the beginning process when an individual is assessing the task and their options; the pre-regret feeling if they make the wrong decision. People tend to feel regret at the actions or inaction that they have performed, which isn't necessarily expressed by any other emotion (George and Dane, 2016). Although regret can be seen as a negative aspect/emotion, it is also crucial to learning as found by researchers such as Forman and Murnigham in their 1992 study investigating the winner's curse in auctions and bidding .
Hey & Panaccione (2011) devised a way to separate people into four types of decision makers: myopic, naïve, resolute and sophisticated. Myopic decision makers are people who may be blind to the decision having multiple aspects and makes their decision on the initial list. Naïve decision makers are people howchoose the best solution based on their observations even if the choice leads to a different decision in the future. Resolute decision makers are people who never change their initial decision despite further assessment where the decision may not seem as appropriate. Sophisticated decision makers are people who constantly reassess their decision throughout the process, sometimes going back to previously dismissed choices when further insight is given. Through these types of decision makers, it can be theorised what kind of response an individual would have on making a decision that involved some monetary value. Out of the participants, most were resolute decision makers, with fewer being significant, followed by naïve and myopic being the least. From this data it can be seen that most people are resolute decision makers (in a monetary context) . This is just another factor that can affect how an individual makes a decision when given options with a focus on money.
Emotional Intelligence and Risk Assessment
Emotional intelligence is the ability and capacity to be aware of one's own emotions. It also reflects how someone uses and handles their own emotions in social settings and creating relationships. Emotional Intelligence has been difficult for researchers to explore due to the variability and lack of theoretical clarity of such as redundancy of emotional intelligence according to the Big Five Personality model (Joseph, et. al, 2010). It has become of increasing interest due to its effects on work performance and finding good workers depended on an emotional intelligence test as it has been theorised that depending on how an individual scores on the test determines how successful they will be in the business testing (much like personality test) (Joseph et. al., 2010).
Although the validity of emotional intelligence can be questionable, there is still a great deal of evidence suggesting its importance. In a study by Mayer, Roberts & Barsade (2008) they reviewed three different approaches to emotional intelligence. They found that specific-ability and integrative-model approaches were the most effective at measuring emotional intelligence.
Specific-ability focuses on fundamental skills that help emotions facilitate thinking. This particular theory explains how emotional approaches can help a person to achieve better decision-making skills (Mayer et. al., 2008). This is through attaching an emotional response to a task will make the individual more likely to adhere to the task (Lyubomirsky, et. al., 2005). Integrative-Model assesses emotion as a joint process. It examines how emotion can be expressed differently for each person and focuses on emotional perception and understanding (Mayer, et. al., 2005). The main difference between these two points is that specific-ability focuses on the discrete aspects of emotion and the integrative-model assesses the overarching framework of emotion.
Through emotional intelligence an individual can ascertain what situation would occur what emotional response for them. Yip & Cote (2012) researched into how high emotionally intelligent participants and low emotionally intelligent participants with anxiety deduced risks and the likelihood of them taking those risks. In the first experimental group, participants were told that they had 60 seconds to prepare a 3 minute speech on why they would be a good job candidate which would be filmed and shown to other students later on. This was to induce anxiety in the participants before the assessor left the room and told participants to fill out some forms for another researcher on risk taking and other miscellaneous tasks. When the assessor came back they filled out a form on manipulation check for anxiety. The control group was only told to mentally recite a grocery list to control and not increase anxiety before filling out the manipulation check for anxiety. They then used the results from this study (the experimental group experienced higher anxiety levels than the control) for the second study to identify is anxiety awareness influenced emotional decision making. They found that participants in the high-anxiety group with low emotional-intelligence levels scored even lower in emotional intelligence when told the anxiety that they were experiencing had no effect on the decision. The authors theorised that this was due to their low emotional intelligence levels; they could ascertain and separate the decision from the emotions they were currently experiencing. From this study it can be seen how emotional intelligence can affect how an individual understands decisions and how they might react depending on their level of intelligence and ability to differentiate their decision from their emotions.
From Wikibook "Motivation and Emotion"
- Risk taking (Book chapter, 2011)
- Risk perception and emotion (Book chapter, 2014)
- Risk taking motivation (Book chapter, 2010)
- Risk taking and emotion in financial markets (Book chapter, 2019)
- Emotional intelligence (Wikiversity)
- Emotion (Wikipedia)
- Risk Literacy (Wikiversity)
- Risk (Wikipedia)
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