Risk Management With Ant And Grasshopper

1. Who does better at managing risk?

The Ant

The Grasshopper

The ant does better at managing risk because ants are known for their hard work, discipline, and ability to plan ahead. They gather and store food during the summer months to prepare for the winter when food is scarce. This behavior demonstrates their ability to assess and mitigate potential risks. On the other hand, the grasshopper is known for its carefree and lazy nature, often neglecting to prepare for the future. Therefore, the ant is more adept at managing risk compared to the grasshopper.

Explanation

The ant does better at managing risk because ants are known for their hard work, discipline, and ability to plan ahead. They gather and store food during the summer months to prepare for the winter when food is scarce. This behavior demonstrates their ability to assess and mitigate potential risks. On the other hand, the grasshopper is known for its carefree and lazy nature, often neglecting to prepare for the future. Therefore, the ant is more adept at managing risk compared to the grasshopper.

2. What is the biggest risk for Ant and Grasshopper during winter?

Winter cold

Starvation from food shortage

Short days

Naturals disasters, e.g. snowstorms

The biggest risk is the shortage of food, which is the central point of the story. Cold certainly is an additional risk, and snowstorms might also be a risk, but we don't know much about the climate in which Ant and Grasshopper are living.

Explanation

The biggest risk is the shortage of food, which is the central point of the story. Cold certainly is an additional risk, and snowstorms might also be a risk, but we don't know much about the climate in which Ant and Grasshopper are living.

3. Let us try to understand the effect of saving food during summer. By not using all his food in summer...

... the Ant averages the impact of the risk over time.

... the Ant increases the amount of food.

... the Ant increases the quality of food.

... the Ant stays fit and in shape.

The total amount of food does not change through saving up in summer. If the storing of food would increase or decrease its quality will depend on the type of food. The risk management effect is the averaging of the impact of the risk over time: The Ant saves in times of surplus for a time of shortage, in this way ensuring a constant supply of food.

Explanation

The total amount of food does not change through saving up in summer. If the storing of food would increase or decrease its quality will depend on the type of food. The risk management effect is the averaging of the impact of the risk over time: The Ant saves in times of surplus for a time of shortage, in this way ensuring a constant supply of food.

4. How does the Ant manage the risk?

By taking an insurance

By working hard

By preparing for the risk event

The Ant didn't mange risk, he just was lucky

The Ant certainly didn't survive by luck only. Also, working does not in itself manage risk: If the Ant had worked hard, but used all his earnings in summer, he would be in the same situation as the Grasshopper. It is his preparation for the very likely risk event, i.e. winter and its food shortage, that keeps the Ant safe here. The Ant could also have taken an insurance from a third party, which then could supply him with food in the situation of a crisis.

Explanation

The Ant certainly didn't survive by luck only. Also, working does not in itself manage risk: If the Ant had worked hard, but used all his earnings in summer, he would be in the same situation as the Grasshopper. It is his preparation for the very likely risk event, i.e. winter and its food shortage, that keeps the Ant safe here. The Ant could also have taken an insurance from a third party, which then could supply him with food in the situation of a crisis.

5. Now let's have a look at the Grasshopper. There are several known problems and behavioral biases that prevent people or communities from implementing a risk management strategy. Which of those did the Grasshopper show most strongly in our story?

Lack of information or knowledge

Overconfidence

Procrastination

Short-term thinking

The main reason which prevented the Grasshopper from also implementing a risk management strategy was his short-term thinking: "Won't be winter till... the winter. It's summer now. Why worry about the winter?" He might also show overconfidence and underestimate the severity of winter (which poses a threat to his life) or lack the knowledge about this severity. Procrastination, i.e. delaying actions, does not play a role here, since the Grasshopper never intended to take any action.

Explanation

The main reason which prevented the Grasshopper from also implementing a risk management strategy was his short-term thinking: "Won't be winter till... the winter. It's summer now. Why worry about the winter?" He might also show overconfidence and underestimate the severity of winter (which poses a threat to his life) or lack the knowledge about this severity. Procrastination, i.e. delaying actions, does not play a role here, since the Grasshopper never intended to take any action.