Enterprise Risk Management, 2nd Edition

CHAPTER 16Unconscious Bias and Risk Management

 

TOBY GROVES, PhD

CEO of Toby Groves Productions

 

INTRODUCTION

Risk is often defined as the “possibility of loss or injury,” which commonly summons thoughts about threats and infers pain and damage. Thoughts about injury and damage tend to spur rigid thinking and, when speaking of risk, brings about a natural desire for certainty and comfort in the false belief that we can clearly and accurately predict future events.

Decision making in the risk-management realm, however, is far from black and white. The goal of risk assessment is not the total elimination of risk. Some level of risk taking is paramount to organizational growth and success. The goal should be smart risk profiling and decision making, which means recognizing how to match organizational objectives to healthy risk management practices.

Bias is an inclination for or against something or someone that influences our reasoning processes. There is an unavoidable level of subjectivity in risk management decisions, making them particularly prone to bias. The reason risk-related decisions are more prone to bias than most other types of decision making is because of the way our brains process information related to risk. Judgments related to threats engage our emotional circuitry, which tends to produce automated responses, making us more prone to faulty assumptions.

Accordingly, one of the most important skills a risk management professional can possess is the ability to ...