Cognitive biases every risk manager must know (part 2)

Neglect of probability

 

The neglect of probability, a type of cognitive bias, is the tendency to completely disregard probability when making a decision under uncertainty and is one simple way in which people regularly violate the normative rules for decision making. Small risks are typically either neglected entirely or hugely overrated. The continuum between the extremes is ignored. The term probability neglect was coined by Cass Sunstein.[1]

There are many related ways in which people violate the normative rules of decision making with regard to probability including the hindsight bias, the neglect of prior base rates effect, and the gambler’s fallacy. However, this bias is different in that rather than incorrectly using probability, the actor completely disregards it.

https://en.wikipedia.org/wiki/Neglect_of_probability

Example: Susan and Jennifer are arguing about whether they should wear seat belts when they ride in a car. Susan says that you should. Jennifer says you shouldn’t… Jennifer says that she heard of an accident where a car fell into a lake and a woman was kept from getting out in time because of wearing her seat belt, and another accident where a seat belt kept someone from getting out of the car in time when there was a fire. What do you think about this?


Déformation professionnelle

 

Déformation professionnelle is a French phrase, meaning a tendency to look at things from the point of view of one’s own profession rather than from a broader perspective. It is often translated as “professional deformation” or “job conditioning,” though French déformation can also be translated as “distortion.” The implication is that professional training, and its related socialization, often result in a distortion of the way one views the world.[1]

As a term in psychology, it was likely coined by the Belgian sociologist Daniel Warnotte[2] or Russian-American sociologist Pitirim Sorokin.

Check out other risk management books

Fundamentals of Risk Management: Understanding, Evaluating and Implementing Effective Risk Management
Implementing Enterprise Risk Management: From Methods to Applications (Wiley Finance)
The Standard for Risk Management in Portfolios, Programs, and Projects

https://en.wikipedia.org/wiki/D%C3%A9formation_professionnelle


Semmelweis reflex

 

The Semmelweis reflex or “Semmelweis effect” is a metaphor for the reflex-like tendency to reject new evidence or new knowledge because it contradicts established norms, beliefs or paradigms.

The term originated from the story of Ignaz Semmelweis, who discovered that childbed fever mortality rates reduced ten-fold when doctors washed their hands with a chlorine solution between patients and, most particularly, after an autopsy (at the institution where Semmelweis worked, a university hospital, physicians performed autopsies on every deceased patient). Semmelweis’s decision stopped the ongoing contamination of patients—mostly pregnant women—with “cadaverous particles”.[1] His hand-washing suggestions were rejected by doctors of his time, often for non-medical reasons. For instance, some doctors refused to believe that a gentleman’s hands could transmit disease.

https://en.wikipedia.org/wiki/Semmelweis_reflex

 


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