Psychological Aspects of Risk Management and Technology – G. Grote ETHZ, Fall09 Psychological Aspects of Risk Management and Technology – Overview

Psychological Aspects of Risk Management and Technology – G. Grote ETHZ, Fall09 Risk  Risk=Damage X Probability or more generally:  Risk=Event X Probability where events may be positive or negative occurrences. or even more generally:  Risks are uncertain events.

Psychological Aspects of Risk Management and Technology – G. Grote ETHZ, Fall09 Risk management  Risk management may concern both the uncertainty and the event: –avoidance event: bank does not give certain types of credit uncertainty: frozen zones in supply contracts –reduction event: lower speed limits on highways uncertainty: creditworthiness check before giving credit –retention event: running any kind of dangerous operation uncertainty: investing in basic research –transfer event: outsourcing of dangerous operations uncertainty: employing freelancers

Psychological Aspects of Risk Management and Technology – G. Grote ETHZ, Fall09 Uncertainty = not knowing for sure  Formal definition –Difference between information needed and information available for a certain task –Ambiguity of available information –Lack of predictability and transparency  Relevant contents –state, response, effect  Possible sources –incomplete information, inadequate understanding, undifferentiated alternatives  Causes –within the system versus in the system's environment

Psychological Aspects of Risk Management and Technology – G. Grote ETHZ, Fall09 Stability Flexibility Management of uncertainty in organizations  Balance between minimizing uncertainty, which creates stability, and coping with uncertainty, which creates flexibility Central planning High standardization High level of automation Little operative freedom Feedforward control

Psychological Aspects of Risk Management and Technology – G. Grote ETHZ, Fall09 Need for concurrent stability and flexibility: Current concepts in management science  Enabling bureaucracy Adler et al., 1999: car model changeovers through problem solving routines, units specializing in routine vs. non-routine tasks, job enrichment  Semistructures Brown & Eisenhardt, 1997: IT project management based on decision latitude combined with extensive communication, probing the future, and clear project transitions  Ambidextrous organization Benner & Tushmann, 2003: Parallel organizations for exploitation and exploration  Mastery of opposites and paradox in leadership Kaplan & Kaiser, 2007: Concurrent directive and enabling, strategic and operational ledership

Psychological Aspects of Risk Management and Technology – G. Grote ETHZ, Fall09 Decision steps for managing uncertainty 1.Analysis of uncertainties involved in a certain work process 2.Costs & benefits of reducing uncertainty 3.Costs & benefits of maintaining/increasing uncertainty 4.Explore beliefs regarding uncertainty in the organization 5.Discuss/review recommendations derived from steps 2 to 4

Psychological Aspects of Risk Management and Technology – G. Grote ETHZ, Fall09 Railway example: Incident analysis ? Three possible meanings of dwarf signal "go with caution" External cause Traffic density Source of uncertainty Incomplete information TD: track occupation S: speed Inadequate understanding TD: Meaning of signal Content of uncertainty State uncertainty TD/S: Probability of track (still) being occupied Response uncertainty TD: Correct speed; S: Inform TD about obstacle Lack of control Lack of transparency TD: which track, speed required by signal Lack of predictability TD/S: track occupation Lack of influence S: choice of speed by TD Potential consequences S: No consequences, as S transfers uncertainties to TD; TD: drive too fast (collision) or too slowly (delay) Required decision/action S: Guide train onto occupied track; TD: Select speed Different actors Train driver (TD) Signaller (S) Internal cause Ambiguous signal Analysis of several incidents involving shunting train onto an occupied track for departure

Psychological Aspects of Risk Management and Technology – G. Grote ETHZ, Fall09 Railway example: Options for handling uncertainties Reduce uncertainties  Technical: e.g. improve dwarf signals  Organizational: e.g. enforce generally lower speed Maintain/increase uncertainties  Maintain: e.g. keep track assignment as signaller function  Increase: e.g. enforce assignment of shunting operations to train driver Beliefs in the organization  Signallers are most powerful actors based on control of uncertainties Anticipated effects  Technical solutions too costly; reduction of shunting speed collides with production pressure; situated role assignments increase flexibility Actual measures taken  Train drivers encouraged to reduce shunting speed; some stations with reduced maximum shunting speed due to low visibility  Role assignment of shunting supervisor to train driver enforced; excep- tion: signaller sets signal without request when relevant tracks known.  Maintain uncertainty and clearly assign it to train driver with some additional support for handling it