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MEMORANDUM To: Professor Mark Abkowitz From: Nur Khairunisa Abdul Rahimi Date: ENVE 296 , Enterprise Risk

Management Re: Homework Assignment 1 Evolutional growth in mobile technology and social media today is contributing significantly to increasing power of risk perception compared to 15 years ago. Anyone can easily access exaggerated news headlines that alarm citizens before official statements are made by responsible bodies. Inauthentic posts or fake reports can go viral in a split second through Facebook or Twitter without having a valid source. Some of these news or posts can cause strong emotional outbreaks, such as anxiety and fear that may cause them to emphasize on the outcomes of the risk instead of the actual probability of the risk happening to them. Although we might have an accurate estimate of the risk, emotions stirred by its fearsome aspect lead us to neglect probability values. This form of decision bias is called probability neglect bias (Sunstein and Zeckhauser 2011). With todays technology, quick and easy access to vivid images of a bad outcome create palpable overreactions, and make people become greatly concern about a risk. As a result, probability renders meaningless to the crowd even though it is very low (Loewenstein et al. 2001).

In my opinion, environmental risks are currently perceived as having more heightened concern than others out of all risks that are discussed. Most environmental issues since 20 to 30 years ago are categorized under neglect bias, because they have low probability risks with strong emotional response, For example, getting cancer contaminants in drinking water, having highly valued species go extinctsuch as the orang utan or the bald eagleor significant life loss due to the meltdown of a nuclear power plant (Sunstein and Zeckhauser 2011). Environmental risks remain a huge concern because their probabilities are difficult to calibrate, even by the experts (Sunstein and Zeckhauser 2011). Therefore, any ordinary citizen will worry about such risks much more in terms of consequences than in their likelihood for occurrence. A significant increase in power of risk perception is also attributed to the increasing number of environmentalists or interest groups that place constant pressure on the government in making laws and policies. Their pressures, combining with the public concern can sometimes drive the government to neglect probability of significant harm in making clean-up decisions (Hamilton and Viscusi 1999). We cannot control public risk perception on information that they received, but we can try controlling the way information gets to them. In order to bring perceived and technicallymeasured risk into closer alignment, Sunstein and Zeckhauser suggests The Office of Information and Regulatory Affairs within the Office of Management and Budget to monitor agency action to ensure current issues or headlines are directed against genuinely significant problems. Besides that, we can come up with general requirement of cost-benefit balancing, with careful attention to the best estimates of relevant probabilities. This requirement should provide a check on regulations that deviate substantially from objective evidence, which provides far too little risk reduction for the resources required (Sunstein and Zeckhauser 2011).

References: Overreaction to Fearsome Risk, Cass R. Sunstein Richard Zeckhauser, 1 October 2010 / Published online: 13 January 2011, Springer Science+Business Media B.V. 2011 Hamilton J, Viscusi WK (1999) Calculating risks: the spatial and political dimensions of hazardous waste policy. MIT Press, Cambridge Loewenstein GF, Weber EU, Hsee CK et al (2001) Risk as feelings. Psychol Bull 127:267286