Behavioral Risk Management
Managing the Psychology That Drives Decisions and Influences Operational Risk
Published on 29. April 2016
XXI, 518 pages
978-1-137-44562-9 (ISBN)
Description
The psychological dimension of managing risk is of crucial importance, and its study has led to the identification of specific do's and don'ts. Those with an understanding of the psychology underlying risk and the skills to recognize its manifestation in practice, have the opportunity to develop frameworks that embody the do's and don'ts, thereby producing sound judgments and good decisions. Those lacking the understanding and the skills are destined to be more hit and miss in their approach to risk management, doing the don'ts and not doing the do's. Virtually every major risk management catastrophe in the last fifteen years has psychological pitfalls at its root. The list of catastrophes includes the 2008 bankruptcy of Lehman Brothers and subsequent global financial crisis, the 2010 explosion at BP's Macondo well in the Gulf of Mexico and the 2011 nuclear meltdown at the Fukushima Daiichi power plant.
A critical lesson from psychological studies for those involved in risk management is that people's judgments and decisions about risk vary with type of circumstance. In Behavioral Risk Management readers will learn that there are specific actions that organizations can undertake to incorporate understanding, recognition, and behavioral interventions into the practice of risk management. There are many examples throughout the book that illustrate doing the don'ts. The chapters in the first part of the book introduce the main ideas, and the chapters in the latter part provide insight into how to apply those ideas to the practical world in which risk managers operate.
A critical lesson from psychological studies for those involved in risk management is that people's judgments and decisions about risk vary with type of circumstance. In Behavioral Risk Management readers will learn that there are specific actions that organizations can undertake to incorporate understanding, recognition, and behavioral interventions into the practice of risk management. There are many examples throughout the book that illustrate doing the don'ts. The chapters in the first part of the book introduce the main ideas, and the chapters in the latter part provide insight into how to apply those ideas to the practical world in which risk managers operate.
Reviews / Votes
"Behavioral Risk Management is a thought-provoking book that advances the behavioral finance literature by moving beyond the historical focus on asset pricing to examine operational risk within a number of institutions. The book effectively demonstrates that investment managers need to understand not only the quantitative tools, such as conditional value at risk, but also the psychology of risk management." (Mark K. Bhasin, Financial Analysts Journal, Vol. 12 (1), 2017)
More details
Series
Edition
1st ed. 2016
Language
English
Place of publication
New York
United States
Publishing group
Palgrave Macmillan US
Target group
Professional and scholarly
Illustrations
XXI, 518 p. 71 illus.
File size
4,13 MB
ISBN-13
978-1-137-44562-9 (9781137445629)
DOI
10.1057/9781137445629
Schweitzer Classification
Other editions
Additional editions
Hersh Shefrin
Behavioral Risk Management
Managing the Psychology That Drives Decisions and Influences Operational Risk
Book
01/2016
Palgrave MacMillan
€96.29
Shipment within 10-20 days
Person
Hersh Shefrin is the Mario L. Belotti Professor of Finance at Santa Clara University, USA. He is one of the pioneers in the behavioral approach to economics and finance. His book
Beyond Greed and Fear
provided the first comprehensive treatment of behavioral finance, and was written for practitioners as well as academics. In 2009, JP Morgan Chase placed it among the top ten books published since 2000. Among Shefrin's other books are
A Behavioral Approach to Asset Pricing
,
Behavioral Corporate Finance
,
Ending the Management Illusion
, and
Behavioralizing Finance
. Shefrin has spent his entire career studying risk from different angles. His work in mathematics has focused on Bayesian combinatorics. His work in economics has focused on uncertainty. His work in finance has focused on the psychology of risk. In addition to his experience as audit committee chair, his consulting work with large financial institutions has focused on behavioral risk management. He is currently teaching full-length professional development courses for executives in behavioral risk management at NYU and the Amsterdam Institute of Finance.
Content
Preface
1. Introduction
2. Three Key Emotions
3. Prospect Theory: Three Cognitive Issues
4. Personality and Risk
5. Biases and Risk
6. Process, Pitfalls, and Culture
7. Minsky, the Financial Instability Hypothesis, and Risk Management
8. Psychology and Ponzi Finance at UBS and Merrill Lynch
9. Moody's and S&P
10. Fannie, Freddie, and AIG
11. RBS, Fortis, and ABN AMRO
12. Behavioral Dimension of Systemic Risk
13. Financial Regulation and Psychology
14. Risk of Fraud, Madoff, and the SEC
15. Risk, Return, and Individual Stocks
16. How Psychology Brought Down MF Global
17. JP Morgan's Whale of a Risk Management Failure
18. Con Ed, BP and MMS
19. Southwest Airlines, General Motors, and the Agencies that Regulate Them
20. Conclusion
Appendices?
1. Introduction
2. Three Key Emotions
3. Prospect Theory: Three Cognitive Issues
4. Personality and Risk
5. Biases and Risk
6. Process, Pitfalls, and Culture
7. Minsky, the Financial Instability Hypothesis, and Risk Management
8. Psychology and Ponzi Finance at UBS and Merrill Lynch
9. Moody's and S&P
10. Fannie, Freddie, and AIG
11. RBS, Fortis, and ABN AMRO
12. Behavioral Dimension of Systemic Risk
13. Financial Regulation and Psychology
14. Risk of Fraud, Madoff, and the SEC
15. Risk, Return, and Individual Stocks
16. How Psychology Brought Down MF Global
17. JP Morgan's Whale of a Risk Management Failure
18. Con Ed, BP and MMS
19. Southwest Airlines, General Motors, and the Agencies that Regulate Them
20. Conclusion
Appendices?
