Error, Hazard, and Risk as Organizational System Problems - Admission/Application Essay Example

Error, Hazard, and Risk as Organizational System Problems Today in contemporary society, experts look at risk in two fundamental ways. Rundmo (11) notes that risk can be looked at as perceived risk or objective risk. Perceived risk refers to an individual’s own estimate of risk which is influenced by the individual’s beliefs, thoughts, and constructs. The perceived risk of an individual is influenced by an individual’s familiarity with the source of danger, the dramatic character of events, and an individual’s control over the situation (Sloan et al 13). Objective risk on the other hand, is based on statistical calculations and probability distributions. Objective risk varies across different cultures and regions. The two perspectives in which experts look at risk raise an important issue. That is, whether risk is a human factor that can be controlled, or risk is an organizational system problem. Organizations engage in risk management in an attempt to minimize future possibility of incurring losses emanating from the activities that they engage in (Davis, Anthony, and Peter 11). As such, risk, error, and hazard are organizational system problems and not a human factor. According to the ISO/DIS 31000 (2), risk management is part of organizational decision making and more importantly part of organizational processes. Organizations engage in risk management in order to make informed choices. Before taking any course of action, it is critical that organization evaluate all the available courses of action and make informed decisions as to the most suitable course of action (Wheeler 219). With risk management, it is possible for organizations to make choices that ultimately contribute towards the fulfillment of organizational objectives. As such, risk, is a part of organizational decision making process, with the organizational objectives in mind. It is an organization’s systems problem and not a human factor problem. Slovic and Peters (322), note that human beings evaluate risk based on intuitive feelings. A recent study on how human emotion affects risk perception showed that anger and fear have positive effects on risk. The study found out that fear amplifies risk estimates, while anger attenuates them. This study underscores an important issue regarding risk and risk management by organizations. That risk management as a process depends on the best available information (Das 531). This information could be from past experiences (which may arise anger and fear among decision makers), could be from feedback, expert judgment, and forecasts. This study highlighted the link between risk management as an organizational process, and factors that may influence it. While it is true that human error may influence risk management, the process itself shall be informed by information from different sections of the organization, and more importantly the outcome of the process shall inform any remedial course of action to be taken if any (Frenkel et al 531). For example, following the evaluation of a number of alternative courses of action, the best course of action is implemented by the organization. The organization will evaluate the outcomes of the selected alternative against organizational objectives and determine whether there is good reason to modify, stop, or continue with the selected course of action. This demonstrates that risk, is a part of organizational system processes and not a standalone activity limited to human error. In the process of risk management, scientific deliberation, logic, and reason as used to evaluate the risk associated with different courses of action available to decision makers (Hassett 6). The process of risk management itself involves the identification of risks associated with each alterative course of action, evaluating the risks and responding to them, establishing resourcing controls, planning reactions, reporting and monitoring risk performance, and reviewing the risk management framework from time to time. These steps characterize a systemic and structured process that characterizes organizational system processes. Many modern organizations recognize that risk management as an organizational process (Hester 6). To this end, many have designed a risk management process composed of risk architecture, risk strategy, and risk protocols. Each of these sections plays a critical role that ensures that organizations conduct a meaningful risk assessment of all alternatives available to them. Risk architecture describes the roles, responsibilities, and communication structure associated with the process of risk management. Risk strategy defines the attitudes, philosophies that guide the process of risk management. Risk protocols are organizational guidelines that specify methodologies used to manage risk within the organization together with the tools and techniques (Sutton 66). This process has been designed to ensure that risk management remains objective and that decisions are made based on objective analysis rather than subjective analysis of alternative courses of action. Risk cannot be considered to be a human factor but instead an organizational system process Within organizations, it is arguable that the people who make decisions are subject to error and prone to miscalculated risks as influenced by their cultural beliefs, past experiences, etc (Renn 5). Little is known of risk minimization efforts in human factor systems that minimize risk within organizations. However, in recognition that human factor systems can affect the organizational risk management process, organizations ought to understand organizational risk factors and ensure that the risk perception and culture of the organization’s employees are aligned to the organizational risk factors. In doing this, the organization recognizes that risk is a part of the organization system process and that any human factors that may affect it need to be aligned to organizational risk objectives. As stated by ISO/DIS 31000 (2), the risk management process is an organizational systemic process that takes into consideration human and cultural factors. Using the accident causation model that focuses on organizational culture and systems, it is possible to establish mechanisms by which the effect of human factors on organizational risk factors can be minimized. A study conducted by Alhakami and Slovic (Slovic and Peters, 323) trying to establish the relationship between perceived benefit and perceived risk of an activity, established that there was an inverse relationship between the two variables and more importantly, the two were influenced by the strength of a negative and positive affect associated with the activity. This finding means that not only do people judge a risk by what they think about it but also by how they feel about it (Slovic 35). The study further established that given the fact that affect guides the perception of benefit and risk, providing information on the benefit of a given activity should change their perception of the activity. These are characteristics of risk management as an organizational systems process. That is, the organizational risk management process is influenced by perceptions of people and that it is based on the best available information (Culp 177). While effective organizational risk management process has been viewed to include the process of quantifying risk (Cameron 356) and developing strategies that can be used to manage it based on the perceptions of people, another body of research has established that organizational risk management should focus on the root cause analysis of individuals, systems that look at procedure, teams, and workplace settings in order to effectively manage organizational system risk factors. This approach recognizes that risk management is an organizational systems process and that it should not be considered a human factor subject to cultural issue and values. While it is true that the cultural perceptions of employees may influence organizational risk management processes, the risk management process remains part of the organization system processes. In order to mitigate risk within organization, a number of actions need to be taken. Organizations need to recognize that people are ethno-centric (Aven and Renn 40). They believe that what appears to be normal in their culture will be normal for everyone. Also, organizations needs to recognize that culture influences how people perceive risk. In view of this, organizations ought to align employee human factors to the organizational risk management factors. This will assist in standardizing the risk management process. Organizations need to recognize and understand that the risks that they face keep changing (Thornton 211). The employees of the organization also change overtime. It would be useful for organizations to keep updating their risk management policy in light of the organizational changes that have taken place. This enables an organization to use current risk assessment tools, and methodologies that are most suited to handle risk management. In view of empirical evidence that shows that people perceive risk of an activity not just based on what they think about it, but also what they feel about it, organizations need to ensure that decision makers while evaluating the risk of alternative courses of action, they need to have the best information so that they adopt the right risk perception. This is because human factors can influence perception and this will in turn affect the organizational risk management process, an organization systems process. The process of managing risk is an integral part of organizational systems processes and not a human factor that can easily be controlled. Risk should be viewed as being an integral component of organizational system processes and not a standalone activity. Human factors can influence the risk management process. For this reason it is important that organizations ensure that their employees’ human factors including cultural beliefs and values are aligned to organizational risk management factors. This way, a more sound risk management process can be conducted that yields meaningful returns and fulfills organizational objectives. Work Cited Cameron, I T. Process Systems Risk Management. San Diego, CA: Elsevier, 2005. Internet resource. Culp, Christopher L. The Risk Management Process: Business Strategy and Tactics. New York: John Wiley & Sons, 2001. Internet resource. Davis, Anthony E, and Peter R. Jarvis. Risk Management: Survival Tools for Law Firms. Chicago, Ill: American Bar Association, produced jointly by the Law Practice Management Section and Center for Professional Responsibility, 2007. Print. Das, Satyajit. Swaps & Financial Derivatives Library. Singapore: J. Wiley, 2006. Print. Frenkel, Michael, Ulrich Hommel, Markus Rudolf, and Gunter Dufey. 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