A board’s highly sophisticated procedure for making risk decisions can often be undermined by a failure to identify risk in the first place. Garry Honey a writer on risk and uncertainty and risk consultant explores this very relevant and topical area.
While behavioural economics aims to understand why we often make irrational decisions, risk management aims to mitigate against unfavourable or undesirable future outcomes through better risk decisions. The success of risk management is based on the accuracy of prediction.
Garry’s work on risk decisions with boards has found that a highly sophisticated procedure for risk management is often undermined by a failure to identify or recognise risk in the first place. In some cases, risk is seen but not recognised; in some it is recognised but ignored or deemed otherwise acceptable; in some cases, it is seen but misinterpreted or recalibrated by a higher authority with different priorities.
There are many types of risk blindness, as indeed there are many types of sight impairment - this article outlines some possible diagnoses.
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