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The risk thermostat – a balancing perspecive on risks and perception

Today I would like to share John Adams‘ inspiring perspective on risks. He basically argues that rewards and accidents/losses are consequences of risk taking. Rewards influence the propensity of a person to take risks. Risk propensity varies from every person to another. On the other hand, failures and losses influenced the perceived danger. Both influence the so-called balancing behavior. Using this model, John Adams argues that today’s institutional risk management is only focusing on the lower part – the accident reducing loop. This will result in a useless pursuit of “safety at any costs”.

John Adams has blogged several interesting articles on risk in general and many other articles worth reading.

http://primoeurope.files.wordpress.com/2009/02/the-risk-thermostat.jpg(source: john-adams.co.uk)

2 Comments
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  • Interesting….this may have implications for organizational design such that they could actively design reward and control structures to encourage “risk-taking behavior”….this could promote innovativeness among employees…

    • Hi Suparna,

      thanks for your comment. We are currently working on such (as we call it) exploratory control structures and will hopefully come up with controls that support innovativeness.

      best

      Manuel