Identifying, prioritizing and evaluating risks are crucial to any business’s long-term success. MetricStream’s Yo McDonald lays out how specific biases affect these processes and ways to find them.
We are all familiar with the risk/reward terminology. Risk is everywhere, and identifying risks is an art of applying scientific principles of known and unknowns. The knowns are a phenomenon of the past, and unknowns are the transformation of the presence in the future. The biases in risk identification evolve from individual, institutional or global experiences. The biases that effect risk identifications leading into the risk prioritizations process include the following:
Cognitive Bias – A collection of predispositions and perceptions – often influenced by incentives, wants and fears – that could affect the risk assessment process.
Confirmation Bias – As humans, we are always seeking approval from others who will confirm our position. During risk identification, this may lead to a failure to capture a range of alternative risks in an organization.
Groupthink Bias – Conducting a risk identification in a group setting might lead to thoughts of a population who think alike. In the process, an important risk raised by an outlier may be ignored due to a false consensus effect.
Availability Bias – Our…
