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Risk Perception Is Age Dependent
By Preben Ormen

The age of a person influences the perception of risk. Stereotypically, and I believe there is a lot of truth in this, the younger you are, the fewer obstacles you see. We can call it the exuberance of youth, but the way it plays out is that a young person is a little more open to take risks and shrug off obstacles; sometimes for bad reasons and other times quite rightly so.

This is not a bad thing because it is not helpful to let us be overwhelmed by all the perceived obstacles, imagined or real. They won’t all materialize, just some. We wont have to deal with all of them. We just have to deal with the particular thing that occurs for us.

As we get older, we tend to forget that or we become more and more attuned to the fact that the picture is a little more nuanced than what we thought like at an earlier age. Sometimes we call this experience, other times we can call it fear.

It depends upon our own grounding and how comfortable we are with our own position and if we have reserves. That is if we think we have certain capacities like knowledge, skill and experience to deal with things or material reserves like wealth or useful possessions of other kinds.

Alternatively, we may have a better-developed sense of our own limitations, which may prevent us from getting into something where the battle was lost before we even started.

So, restraint can be a good thing if it comes from wisdom expressed as a better sense of risk and how that risk applies to us personally or a clearer more accurate self-assessment of our own capabilities to deal with those particular things that occur to us.

Coupled with this, with age comes a better appreciation of not only the likely probability of occurrence of events, but also of the severity of impact; the assessment of how and how strongly these events may affect us in good or bad ways.

So it is important to realize that it is not just about the probability of occurrence, but also about the way and how severely, the event will affect us.

Without some experience it is very difficult to become clear on this. However, that said, most mental models for risk are not that great.

We tend to overvalue and over predict occurrence of events with small likelihoods of occurrence, but which may have severe effects.

Just as familiarity breeds contempt, to use a worn phrase, unfamiliarity can work the opposite way to overdramatize something in our own minds.

This isn’t all bad. We’re not all alike and value risks differently and rightly so. As long as we are aware of our some of our most basic biases , we can indeed put our judgments to a test, even if it is us going through in our own minds the arguments for or against whatever we are contemplating and the premises upon which we base our conclusions.

Preben Ormen has over 35 years experience with a wide range of businesses, teams and cultures from around the world. He has experience in SAP, IT Governance, procurement, system selection and integration, and performance and process improvements. You can read more from Preben on his blog, you can follow him on Twitter, and you can contact him via LinkedIn.

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