The manner in which information necessary for
decision making is presented can greatly influence how risks are perceived.
Consider this example: In a particular case of disaster management, the only
options available are provided in 2 different ways to the public for one to be
chosen (where lives of 600 people are at stake).
If program A is followed, 200 people will be
saved. If Program B is followed, 1/3 probability is 600 people will be saved
and 2/3 probability that nobody will be saved.
72% of the target group chose option A and 28%
If program A is followed, 400 people will die.
If Program B is followed, 1/3 probability is that nobody will die and 2/3
probability that 600 people will die.
This time only 22% of the target group chose
option A and 78% option B
1. The option perceived as yielding firm gain will
tend to be preferred over those from which gains are perceived as risky or only
2. Option emphasizing firm losses will tend to be
avoided in favour of those whose chances of success are perceived as probable.
Costs of Products
products is High, if designed unsafely
and Warranty Expenses
Customers due to injuries in using it
rework, lost time in attending to design problems
Manufacturer‟s understanding of the risk in a
product is necessary:
reduce secondary costs
the possible risk for purposes of pricing, disclaimers, legal terms and
the cost of reducing the risks
a decision before finalizing the design.
Buyer‟s understanding of the risk in a product
whether he/she wants to take the risks
whether the „risk vs. costs‟ justifies taking the risk.