As a species, we humans are notoriously poor a conceptualizing risks. Yes, historically, we have developed some pretty good mechanisms to evade predatory animals, but the chances of being pursued around the modern workplace by an actual sabre toothed tiger are extremely slim these days. The biggest physical risks we face in our modern lives are from our fellow humans, our built environment and our various forms of transport, few of which really factored in our evolutionary past until the past couple of hundred years.

This poorly evolved perception of risk has also transferred into how we rank risks in our working lives. We tend to overestimate the risks associated with things we are unfamiliar with and, conversely, underestimate the risks and likelihood of eventuating of things we are familiar with.

Regardless of our familiarity with a particular potential risk, we also have a tendency to assume a linear, balanced symmetrical profile for risks, so we assume that, for instance, a particular task we are scheduling has as much chance of finishing early as late and, that the degree of variability will be evenly distributed. This assumption is, however, highly flawed, the great majority of risks in the business world are, in fact, asymmetrical in nature. They almost always have a bias either to greater or lesser than the perceived normal point.

What Are Asymmetrical Risks

Asymmetrical risks occur in situations where there is a likelihood that the outcome of the risk event will be either greater than or lesser than the norm, so something is more likely to occur or less likely to occur, not equally as likely or not.

So, for instance, if you were to predict that a particular task would take a week to complete, the absolute minimum time for that task to be completed will be no greater than one week before it is due to complete, since it has a predicted duration of one week, but the potential for the task to be late is almost infinite, since the time following its planned completion date stretches into weeks, months and years, though in reality the task is of course likely to be finished within a sensible duration.

Similarly, if a commodity is anticipated to cost $1,000 when an estimate is generated, the realistic minimum a project may pay for the commodity could be $0, assuming one were to be found in stock or donated, but the potential for it to cost substantially more than the budgeted $1,000 is again a realistic possibility.

This asymmetry of likelihood manifests its self most commonly in schedule and budget planning, where personnel are required to predict a plus and minus for task durations and likely costs for goods and services. It is here that a combination of our natural human difficulty in perceiving risks and our optimism that we can control, and even reduce risks begin to cause real problems for projects in what is known as optimism bias.

The Impact Of Optimism Bias on Asymmetrical Risk Planning

Our poorly developed ability to adequately comprehend and conceptualise risks leads to toward optimistic projections for things we believe we can control but, in reality are completely outside of our control.

For instance, when planning a project budget there is a tendency to assume that if you are buying in bulk you will get a discount on the items, when in reality it could be that other market forces drive the cost of the equipment up so far that even your discount will still result in a greater per unit cost. Similarly, there is a tendency to assume that labour rates will progress at a constant pace, though market forces could drive them higher much faster. Also, the time taken to complete a task may be accurately estimated and that e...