Risk Literacy and Communication (RiCoM)

Max Planck Partner Group

Head: Kavitha Ranganathan
 

Team
Risk Literacy Around the World
Dialogues with LLMs for Financial Risk Communication
TAPMI–MPIB Collaborative Winter Schools in India

Team

Last update: September 2026

Predoctoral Fellows

Aditya Laumas (since 02/2026: T A Pai PhD Scholarship at MAHE, Manipal)

Affiliate Researchers

Felix Rebitschek (Harding Center for Risk Literacy at the University of Potsdam, Faculty of Health Sciences Brandenburg, Potsdam, Germany); Dirk Wulff (Center for Adaptive Rationality, MPI for Human Development)

The Risk Literacy and Communication (RiCoM) group was established at T A Pai Management Institute (TAPMI) in Manipal, India, in August 2024 and will end its term as a Max Planck Partner Group in 2029. It addresses fundamental questions about how individuals and institutions understand, interpret, and communicate risk. Specifically, RiCoM investigates the following questions: How risk literate are individuals and experts? How do they understand and interpret statistical, numerical, and graphical information and make informed decisions? RiCoM also develops innovative risk communication tools that leverage large language models (LLMs) and are sensitive to cultural, linguistic, and role-based differences between experts and everyday decision-makers. To this end, the group conducts experimental and survey studies in both WEIRD and non-WEIRD countries to ensure broad cross-cultural representation. The overarching aim is to connect theory and practice, with direct implications for how institutions communicate risk to foster informed decision-making.

In addition, RiCoM organizes winter schools on bounded rationality at TAPMI in collaboration with the MPI for Human Development (MPIB). These week-long winter schools in India aim to bring together decision science scholars from around the world, particularly from the Global South, to exchange ideas, develop interdisciplinary research collaborations, and advance theory and practice on informed decision-making. RiCoM closely collaborates with several projects within the Center for Adaptive Rationality (ARC) at the MPIB, as well as the Harding Center for Risk Literacy at the Faculty of Health Sciences, Brandenburg.

Risk Literacy Around the World

During the reporting period, RiCoM has primarily been involved in several large-scale cross-cultural projects on identifying core competencies for risk literacy. The first project on Risk Literacy (2025–2027) investigates how individual differences in numeracy, graph literacy, and their combination in a composite risk literacy construct relate to real-world financial outcomes, including wealth accumulation, income, financial behavior, and well-being, across diverse cultural and socioeconomic contexts. This project comprises of three studies conducted in Europe and India: Study 1, a large European survey (N ≈ 1412–1564) establishing baseline associations between numeracy, graph literacy, and financial outcomes; Study 2 (India 1, N = 699), a 2025 Indian online panel study extending this work to the Global South and incorporating additional covariates (Cognitive Reflection Task, financial literacy, risk appetite) as well as first tests of the "illusion of certainty"; and Study 3 (India 2, N ≈ 1412–1591), a second, larger Indian replication focusing on extended outcomes such as crisis decision-making and quality of life and providing external validity for the risk literacy construct. The central hypothesis is that individuals who interpret numbers and probabilistic information more accurately make better financial decisions, which in turn yields measurable economic advantages such as wealth accumulation. A key conceptual contribution is the "illusion of certainty" construct—the tendency to treat probabilistic outcomes as certain—a distinct, complementary dimension of risk literacy beyond numeracy and graph literacy. In planned follow-up projects, RiCoM will extend this work by systematically examining additional dimensions of risk literacy, i.e., the distinction between risk and uncertainty. Conceptually, the project builds on prior work on how people use boundedly rational strategies and heuristics to make decisions under risk and uncertainty (Ranganathan & Lejarraga, 2021; Berg et al., 2018). Methodologically, this project involves a psychometric scale development including the assessment of reliability, construct and external validity, with the goal of arriving at a robust composite measure of risk literacy.

Key References

Dialogues With LLMs for Financial Risk Communication

This project examines how interactive conversations with an LLM shape retail investors' understanding of mutual fund risk disclosures relative to static FAQ-based information. In a between-subjects online experiment with 1,200 Indian household investors, all participants first review a mutual fund factsheet and are then randomly assigned either to interact with an AI-assisted chatbot about the same factsheet or to view the fund's FAQ section. The study compares groups on comprehension of key factsheet elements, confidence, perceived informedness, and stated investment decisions, and relates these outcomes to individual differences in risk and financial literacy, general ability, and demographics, thereby providing some of the causal evidence on how LLM-based tools can enhance regulated financial disclosure for retail investors. Conceptually, the project aims to extend prior work showing that simulated experience and interactive tools can support informed investment decisions (Lejarraga et al., 2024). In follow-up projects, we plan to study meetings in which financial advisors explain mutual fund factsheets to clients either with support from an AI-based chatbot or without any AI support, and compare clients' understanding of the factsheet information, including risk disclosures, across these settings.

Key Reference

TAPMI–MPIB Collaborative Winter Schools in India

As a primary objective, RiCoM aims to strengthen behavioral science research in the Global South, and the TAPMI–Max Planck Winter Schools on bounded rationality and boosting informed decisions are a key vehicle for this goal. Since 2018, these weeklong schools at TAPMI, Manipal have been held intermittently in collaboration with the MPIB and attract over 80+ applications annually, from which around 30 early-career researchers including investment and health professionals are invited. The interdisciplinary cohort spans economics, finance, psychology, philosophy, cognitive science, computer science, medical studies, and management. Across editions, internationally reputed scientists have served as keynote speakers and faculty, including scholars from institutions such as the MPIB, University of Cambridge, University of Southampton, Indian School of Business, Ashoka University, and other Indian and international institutions. The 2025 Winter School on "Boosting Informed Decisions" continued this tradition by combining lectures, workshops, and capstone projects to advance dialogue on risk communication, simple heuristics, boosting for misinformation, and public-policy-relevant research.