A board’s highly sophisticated procedure for making risk decisions can often be undermined by a failure to identify risk in the first place.
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. Philip Tetlock and Dan Gardner examined the art and science of prediction in their seminal work Superforecasting, which followed the Good Judgment project in the US to determine how the quality of judgment can best be improved through data and analysis. Delivering "good judgment" is what behavioural economics and risk management have in common. My own work on risk decisions with boards has found that a highly sophisticated procedure for risk management is often unde