By Dr. Antonius Alijoyo
Founder of Center for Risk Management and Sustainability (CRMS Indonesia) and Chair of supervisory board of Indonesia Risk Management Professionals Association (IRMAPA)

5 minutes reading

Inspired by the theme of the Risk Beyond Conference, which will be held on 8-9th December 2022, titled “The Perception: Managing It or being drifted away” –, the author is pondering the meaning and influence of perception on an organization process and about risk perception to decision making process in particular. And, what could be the impact if the risk perception is not well cultivated throughout the organization, henceforth, in addressing and dealing with corporate risks, including at their governing boards.

Perception affects the organizational process because if people cannot properly perceive the given goal or the aim of the organization, then they might not be working towards it. And, if they are not working towards It, then that organization faces a gap between what is required of the people and what is actually being done by them. As such, the gap could cause an organization fails to accomplish their goals/objectives, which might bring them down to crisis and event disaster. On the contrary, having the right dimensional of perception/risk perception will help people fine-tune and shape the judgment to make about the characteristics and severity of a risk. Understanding and cultivating risk perception, therefore, become critical and important as organizations face potential economic recession that comes to their doorstep in the midst of VUCA – Volatility, Uncertainty, Complexity, and Ambiguity. By cultivating perception, we may expect that the ripple effects of bias due to uncultivated perception are minimized.

Perception and risk perception

Perception refers to our sensory experience of the world. It is through experience that we gain information about the environment and or circumstances. However, people do not solely respond to the stimuli in their environment and or circumstances, but they pay selective attention to some aspects and ignore other elements that may be immediately more apparent to other people. Based on this, perception may be defined as the process by which individuals detect and interpret environmental stimuli upon which they formulate responses and act accordingly.

Risk perception is the subjective judgment that people make about the characteristics and severity of a risk. Risk perceptions are affected by four factors: affective, cognitive, contextual, and individual. Therefore, understanding the wide range of respective factors is important and cultivated. Several theories have been proposed to explain why different people estimate the dangerousness of risks upon which three major families of theory have been developed, i.e., Psychology approaches, sociology approaches, and interdisciplinary approaches.

  • Psychology approaches: People use cognitive heuristics in sorting and simplifying information, leading to biases in comprehension. This approach assumes that individuals behave rationally by weighing information before making a decision and that individuals have exaggerated fears due to inadequate or incorrect information, which may lead to biased risk identification, analysis, and evaluation. Implied in this assumption is the need to cultivate risk perception through additional information that can help people understand true risk and lessen the ripple effects of the sensation of danger.
  • Anthropology/sociology approaches: It posits risk perceptions as produced by and supporting social institutions. In this view, perceptions are socially constructed by institutions, cultural values, and ways of life. Group refers to the extent to which individuals are bounded by feelings of belonging or solidarity. The greater the bonds, the less individual choice are subject to personal control. Implied in this assumption is the need to cultivate a group’s risk perception through effective communication and consultation that can help an organization avoid misperception among and within groups.
  • Interdisciplinary approaches:The Social Amplification of Risk Framework (SARF), which combines research in psychology, sociology, anthropology, and communications theory, outlines how communications of risk events pass from the sender through intermediate stations to a receiver and, in the process, serve to amplify or attenuate perceptions of risk. The main thesis of SARF states that risk events interact with individual psychological, social, and other cultural factors in ways that either increase or decrease public perceptions of risk. Implied in this assumption is the need to cultivate risk perception by comparing responses from different groups in a single event or analyzing the same risk issue in multiple events. In so doing, an organization may have a better balance and or calibration on viewing and weighing their risks.

Ripple effects and improving the perception

Biased or overly biased perception/risk perception, particularly if they are not cultivated, will generate ripple effects that lead to a wrong decision and or action in addressing and managing risks. These ripple effects are caused primarily by the amplification of risk that will lead to the secondary-order impacts, which are then perceived and reacted by individuals and groups, resulting in third-order impacts, and so on. As each higher-order impact is reacted to, they may ripple to other parties and locations.

Cultivating perception/risk perception is therefore needed and critically important to avoid the ripple effects. As such, we come to the question, “How to cultivate and improve perception?”. To answer that question, we need to understand the two sides of the coin: self-perception and perception of others, and then employ perception checking to improve both of them toward cultivating our risk perception continuously and cautiously:

  • Improving self-perception: Since self-concept and self-esteem are so subjective and personal, it would be inaccurate to say that someone’s self-concept is “right” or “wrong.” Instead, we can identify negative and positive aspects of self-perceptions as well as discuss common barriers to forming accurate and positive self-perceptions and then work cautiously on getting them improved. Working on it tirelessly.
  • Avoid reliance on rigid schemata:Since we rely on schemata almost constantly to help us make sense of the world around us, they become so familiar that we use them as scripts, which prompts mindless communication and can lead us to overlook new information that may need to be incorporated into the schema. So it’s important to remain mindful of new or contradictory information that may warrant revision of a schema. Keep yourself mindful.
  • Be critical of socializing forces: We learned that family, friends, sociocultural norms, and the media are just some of the socializing forces that influence our thinking and therefore influence our self-perception. These powerful forces serve positive functions but can also set into motion negative patterns of self-perception. Be critical, then.
  • Beware of Self-fulfilling prophecies:Self-fulfilling prophecies are thought and action patterns in which a person’s false belief triggers a behavior that makes the initial false belief actually or seemingly come true. Don’t let us be trapped into it.
  • Beware of Distorted Patterns of Thinking and Acting: Since we all have perceptual biases that could distort our thinking, beware of some distorted patterns of thinking and acting. Keep learning about some typical negative patterns of thinking and acting that may help us acknowledge and intervene in them. One such pattern involves self-esteem and overcompensation.
  • Create and Maintain Supporting Interpersonal Relationships: Most people have their social cycle in their lives, either friends, family, romantic partners, or colleagues. When people find themselves in negative relational cycles, it is difficult to break out of those cycles. However, we can make choices to be around people that will help us be who we want to be and not be around people who hinder our self-progress. This notion can also be taken to the extreme, however. It would not be wise to surround yourself with people who only validate you and do not constructively challenge you because this, too, could lead to distorted self-perceptions.

Hope this short article is useful.

Dr. Antonius Alijoyo, founder of Center for Risk Management and Sustainability (CRMS Indonesia) and Chair of supervisory board of Indonesia Risk Management Professionals Association (IRMAPA).