Risky business: How social psychology can help improve corporate risk management

Research output: Contribution to journalComment/debate

Abstract

Drawing on research in management theory, risk analysis, and the social sciences, this installment of Business Law & Ethics Corner promotes diversity of thought in corporate governance as not only beneficial to business growth and creativity, but also imperative to managing risk successfully. The article begins with a review of four major worldviews and the risk preferences of each. Next, it examines psychological processes that guide human decision making and greatly influence risk perception. The article then applies these worldviews and psychological phenomena to the case of risk management. It offers a critique of current risk management practices, drawing on evidence from the 2007-2008 financial crisis. The article concludes by promoting increased diversity of worldviews in corporate governance as a way to prevent the same risk blindness that led to the Great Recession.

Original languageEnglish (US)
Pages (from-to)551-557
Number of pages7
JournalBusiness Horizons
Volume57
Issue number4
DOIs
StatePublished - Jul 2014
Externally publishedYes

Keywords

  • Corporate governance
  • Cultural cognition
  • Cultural theory
  • Financial collapse
  • Risk management
  • Social psychology

ASJC Scopus subject areas

  • Business and International Management
  • Marketing

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