What is Our Perception of Project Risk, and do the Current Theories Truly Reflect Our Pragmatic Interpretation of This Perception?

Abstract

Risk behavior of management and the consideration of utilities and the propensity to accept certain risks, fall into a broad field of behavior and cognitive decision-making. This paper explores the wide literature on the perception of risk (in particular project risk) and then focuses on a very narrow area of that research—the perception of the relationship between the probability of risk occurrence and its possible impact if it did occur. Through a case study approach, it concludes that the linear relationship between risk “probability” and “impact” producing a “risk value” ${\text{(RV}} = {\text{P}\,\text{x}\,\text{I)}}$ may not be “perceived” to be correct and that the relationship may, in fact, be exponentially influenced.