Assignment task:
Fact Pattern
You are the Chief Risk Officer for Brokers-Are-Us, Inc., a securities brokerage firm serving both retail and institutional investors. The board of directors has asked you to read pp. 8-10 of The Great Game Will Never End: Why the Global Financial Crisis Is Bound to Be Repeated.
Questions
The board wants you to choose three of the Individual Behavioral Biases discussed in pp. 8-10 and as to:
Q1. Discuss why it is important for risk managers to pay close attention to behavioral biases
Q2. Explain why you chose those three behavioral biases
Q3. Provide one risk management example for each of the three behavioral biases that you chose
In answering these three questions, the board wants you to keep in mind the following quote:
"In order to manage enterprise risk, one must have a good sense of why people act they way that they do. Managers, employees, and customers are not perfectly rational automatons--they are humans, making decisions as best they can."