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Volume 30, Issue 3

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Monday, 02 October 2017 14:43

Addressing the Bias Problem in Risk Management

Avoiding Blind Spots, Groupthink and Other Issues

Though virtually every involved party was at fault to some degree, bias on multiple fronts was largely the cause of the 2008 financial crisis. Given that bias in risk management can result in a disastrous event such as this one, protecting against biases is critical. Jim DeLoach presents several strategies to overcome these blind spots and effectively address operational risks.

Few would argue that the 2008 financial crisis was likely the most spectacular failure in risk management recorded to date. There are so many causal factors and culpable parties, we cannot possibly cover them all. One of my favorite books on the subject is All the Devils Are Here: The Hidden History of the Financial Crisis. The promo for this outstanding, highly readable book reads as follows:

As soon as the financial crisis erupted, the finger-pointing began. Should the blame fall on Wall Street, Main Street or Pennsylvania Avenue? On greedy traders, misguided regulators, sleazy subprime companies, cowardly legislators or clueless homebuyers? According to [the authors], the real answer is all of the above – and more. Many devils helped bring hell to the economy. And the full story, in all of its complexity and detail, is like the legend of the blind men and the elephant. Almost everyone has missed the big picture. Almost no one has put all the pieces together.

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http://www.corporatecomplianceinsights.com/addressing-bias-problem-risk-management/