Matthew Leitch investigates how underlying and subconscious factors affect the level of risk people are prepared to take in corporate decision-making.
Why do some people take crazy risks while others are too cautious? Why are we more cautious some days than others? When we make risk-taking decisions, which factors should we take into consideration and which are the irrelevant causes of bias? And what can financial managers do to improve risk-taking decisions?
Let’s consider some factors that are clearly irrelevant biases and gradually move on to factors that are relevant factors that should be thought about carefully.
A surprisingly large amount of scientific research has been done to study the links between testosterone (in men and women), power and risk-taking. For example, if an influential male executive, about to go into an important meeting, is reminded of a time when he was particularly powerful and successful, gets a nice smile from an attractive woman, and then sits down in the meeting on a wide, comfortable chair, the scene is set for some bold, perhaps reckless, perhaps unethical decisions.
This is an extract from the Business & Management Magazine, Issue 261, February 2018.
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