Module 3 - Only Self Assesment Issues Flashcards
Herbert Simon approach to decision making involves what steps
Intelligence (is there a problem)
Design (what are the alternatives)
Choice
Implementation
Classical decision theory makes what assumptions
Decision makers are objective
Have complete information
Consider all possible alternatives
Define bounded rationality
Individuals make decisions by coati ting simple models that extract the essential features from problems without capturing all their complexity
Types of decision theory
Normative - how decisions should be made
Descriptive - how people actually make decisions
Prescriptive - how decisions should be made in realistic settings
Define personality
Those relatively stable and enduring aspects of individuals that distinguish them from other people, making them unique, but which at the same time allow people to be compared to each other.
Personality can be described by 5 broard factors
Extroversion Agreeableness Conscientiousness Emotional stability Openness
Define the 3 risk attitudes
Risk adverse
Risk neutral - reacts in line withy the risk probability
Risk seeking
Risk belief define
The psychological state in which an individual is convinced of the truth of a proposition
Describe the perception process
Stimulus
Selective attention (reduce information)
Perceptual organisation (classify or group similar stimuli together)
Response
Define closure in terms if perception
Closures is when we fill in the gaps for incomplete or ambiguous information
Define judgement
The cognitive process of reaching a decision or drawing conclusions
Define heuristic
A rule of thumb strategy intended to increase the chances of quickly solving a problem
Define 5 types of heuristic
Anchor and adjustment - judgement made from an initial value (anchor)
Availability - base judgements of probability on the basis of information that is readily available
Related representative - base judgement in things that are familiar
Overconfidence
Framing
Define three effects of heuristics
Recent events get more weight
Events that aren’t understood are viewed as more concerning
Close events viewed as more worrying than far off events
Define 3 individual predictors of risk behaviour
Risk preferences
Risk perceptions
Risk propensity
Define 4 characteristics of organisational risk behaviour
Group composition
Cultural risk values
Leader risk orientation
Organisational control systems
Define 2 characteristics of problem solving risk behaviour
Probably familiarity Problem framing (in what context is the problem given)
Define risk propensity
The general likelihood of a person behaving in a more or less risky way
Define risk perception
Risk perception describes the way in which a stakeholder views a risk based upon a set of values or concerns.
Discuss the 1 extremes of the risk philosophy line
“Techno scientific” sees risk as an objective phenom omen and undertake rational approaches e.g. Measurement and calculation.
Relativist sees risk as a social / psychological construction
Define the 3 types of business model for firms engaged in risk management
The pure risk control model
The efficiency replacement model
The risk transformation model
Defined business risk culture
The shared way of thinking and acting on perceived organisational risks
Three methods for deriving probabilities
A priori
Relative frequency
Subjective
Define 2 types of people involves with risk
Organisers - more control is better
Behaviourists - continuously trying to increase control is self defeating
Define the standard risk management process (RMP)
Set goals and establish content Identify risks Analyse risks Evaluate risks Treat risks
Define the main factors when describing a risk
Name of risk
Scope of risk
Nature of risk (strategic , operational etc.
Stakeholders
Distinguish between estimation and valuation and measurement and analysis
Estimation and evaluation are qualitative
Measurement and analysis are quantitative
Describe the Delphi method
Experts are taken through a process of considering an issue, commenting on that issue, reviewing and reacting to the comments of other experts and revising to a final view
