What does it mean by saying someone is "effectively risk averse/loving"?
"Effectively" has two definitions:

1: in such a manner as to achieve a desired result.

2: actually but not officially or explicitly.

O+C are using the second definition here. This is because the risk averse/loving behaviour that is being exhibited does not come from the concavity of the agent's utility function, but instead indirectly, from the concavity of the c.d.f of the random cost $\eta$ that the monitor will have to pay if they misreport information. So the agents are not "officially" risk averse/loving but as a result of the concavity/convexity of the monitor's cost cdf they will behave as a risk averse/loving agent would when the cdf is linear.

Hope this helps!