How Not to Make Bad Risk Decisions
Guest Post by Ed Perkins (first posted on CERM ® RISK INSIGHTS – reposted here with permission)
Why are there “bad” decisions? No one starts out to deliberately make a bad decision. If you look into available thought papers and reports, you can find some evidence that can provide some understanding of how bad decisions are made.
COSO in 2012, commissioned a report on “Enhancing Board Oversight” focusing on challenges and biases in making professional judgments.
More recently, several HBS faculty authored a study an “attribution error”, where decisions are biased by unjustified attributions of goodness to applicants based on “luck” rather than ability. [Read more…]