Risk Management Case Study

Objective

The study aims at showing how cognitive bias of individuals and leaders in position can influence risk decision making and how these biases can be detrimental to disaster management if not reduced or limited. It further discusses disaster planning and the need to incorporate cognitive biases into effective integrated risk management practices.

Introduction

Planning risk should not only be internal because a lapse in considering other stakeholders in the external environment can also be detrimental to society with its associated cost. An effective integrated risk management will make every one resilience to the occurrence of future risk.

The need for an organization to have a structural approach to effective risk management is

This cannot be done without an organization having effective risk management policies and healthy risk culture. According to (Cormican, 2014, pp. 401-413) “effective risk management policies can increase stakeholder confidence and organization long term viability”. However, these strategies may not necessarily deter market uncertainties or decrease any particular risk (Lipshaw, 2011) Decisions are still made by individuals and their personal biases may be more influential than any risk assessment report (Harner, 2010). There is therefore the need to acknowledge the existence of these behavioural biases and strategies towards eliminating or reducing

In doing that, managers should be able to identify risk that can create uncertainty and affect their operations, create initiative and culture awareness about it so that it can be managed effectively. This risk identification awareness should be seen flowing through the organization from senior management level down to the junior ranks. Until management and boards understand their roles in identifying risk levels and making efforts to pursue it, it will be difficult for corporations to fulfil the risk oversight roles (Coso.org,