Cognitive Processes of Risk and Opportunity Identification: A Problem-solving Perspective

Verena Stingl, Joana Geraldi

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

To cope with an uncertain future, many organizations have adopted risk management practices. These practices build on a thorough identification of risks and opportunities. Organizational studies have abundantly discussed biases in the assessment and perception of risks and opportunities, and provided some insights on mental constructions of opportunities in the entrepreneurial context. However, this research has typically placed the individual as external to the plan, thus decoupling two cognitive processes that are entangled when people think about their own future: planning and predicting. We adopt the notion of ‘pragmatic prospection’ as a co-consideration of these two processes to further understanding on the cognition of risk and opportunity identification in organizational practice. We develop a theoretical concept of risk and opportunity identification as an ill-structured problem, for which practitioners search for information to construct various possible futures and identify the risks or opportunities therein. By analyzing the information search behavior and post-hoc search verbalization of project practitioners for a quasi-realistic project scenario, we characterize the cognitive processes for the identification of risks and for opportunities. We find that the cognitive processes of the search for risks and opportunities are substantially different. In particular, the findings suggest that risk identification relies often on simpler approaches with lower cognitive load, such as recognition heuristics in the absence of any specified information search strategy. In contrast, we found that the search for opportunities triggered a more conscious engagement with the future, associated with explicit information search strategies and abstraction of cues. These findings challenge the assumption of risk management practice, that risks and opportunities are merely two directions on the same spectra and thus can be approached by the same processes and techniques. On a theoretical level, these findings also provide insights that may explain the ‘threat bias’, a tendency of organizations to identify threats rather than opportunities.
Original languageEnglish
Publication date2019
Publication statusPublished - 2019
Event35th EGOS Colloquium 2019: Enlightening the Future: The Challenge for Organizations - University of Edinburgh Business School, Edinburgh, United Kingdom
Duration: 4 Jul 20196 Jul 2019
Conference number: 35
https://www.egosnet.org/2019_edinburgh/colloquium

Conference

Conference35th EGOS Colloquium 2019
Number35
LocationUniversity of Edinburgh Business School
CountryUnited Kingdom
CityEdinburgh
Period04/07/201906/07/2019
Internet address

Keywords

  • Risk and opportunity identification
  • Pragmatic prospection
  • Cognitive processes
  • Active information search
  • Projects

Cite this

Stingl, V., & Geraldi, J. (2019). Cognitive Processes of Risk and Opportunity Identification: A Problem-solving Perspective. Paper presented at 35th EGOS Colloquium 2019, Edinburgh, United Kingdom.
Stingl, Verena ; Geraldi, Joana . / Cognitive Processes of Risk and Opportunity Identification : A Problem-solving Perspective. Paper presented at 35th EGOS Colloquium 2019, Edinburgh, United Kingdom.
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note = "null ; Conference date: 04-07-2019 Through 06-07-2019",
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Stingl, V & Geraldi, J 2019, 'Cognitive Processes of Risk and Opportunity Identification: A Problem-solving Perspective' Paper presented at, Edinburgh, United Kingdom, 04/07/2019 - 06/07/2019, .

Cognitive Processes of Risk and Opportunity Identification : A Problem-solving Perspective. / Stingl, Verena; Geraldi, Joana .

2019. Paper presented at 35th EGOS Colloquium 2019, Edinburgh, United Kingdom.

Research output: Contribution to conferencePaperResearchpeer-review

TY - CONF

T1 - Cognitive Processes of Risk and Opportunity Identification

T2 - A Problem-solving Perspective

AU - Stingl, Verena

AU - Geraldi, Joana

PY - 2019

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AB - To cope with an uncertain future, many organizations have adopted risk management practices. These practices build on a thorough identification of risks and opportunities. Organizational studies have abundantly discussed biases in the assessment and perception of risks and opportunities, and provided some insights on mental constructions of opportunities in the entrepreneurial context. However, this research has typically placed the individual as external to the plan, thus decoupling two cognitive processes that are entangled when people think about their own future: planning and predicting. We adopt the notion of ‘pragmatic prospection’ as a co-consideration of these two processes to further understanding on the cognition of risk and opportunity identification in organizational practice. We develop a theoretical concept of risk and opportunity identification as an ill-structured problem, for which practitioners search for information to construct various possible futures and identify the risks or opportunities therein. By analyzing the information search behavior and post-hoc search verbalization of project practitioners for a quasi-realistic project scenario, we characterize the cognitive processes for the identification of risks and for opportunities. We find that the cognitive processes of the search for risks and opportunities are substantially different. In particular, the findings suggest that risk identification relies often on simpler approaches with lower cognitive load, such as recognition heuristics in the absence of any specified information search strategy. In contrast, we found that the search for opportunities triggered a more conscious engagement with the future, associated with explicit information search strategies and abstraction of cues. These findings challenge the assumption of risk management practice, that risks and opportunities are merely two directions on the same spectra and thus can be approached by the same processes and techniques. On a theoretical level, these findings also provide insights that may explain the ‘threat bias’, a tendency of organizations to identify threats rather than opportunities.

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KW - Pragmatic prospection

KW - Cognitive processes

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KW - Projects

KW - Risk and opportunity identification

KW - Pragmatic prospection

KW - Cognitive processes

KW - Active information search

KW - Projects

M3 - Paper

ER -

Stingl V, Geraldi J. Cognitive Processes of Risk and Opportunity Identification: A Problem-solving Perspective. 2019. Paper presented at 35th EGOS Colloquium 2019, Edinburgh, United Kingdom.