Abstract
Previous studies of risk-taking suggest there are significant variations across individuals' willingness to take financial risk within the organisational context. For example, a decision maker's propensity to take risk may be more aligned with his unique planning horizon. Previous research also suggests that division and lower level managers are typically more risk averse than top managers in the organisation. In this case study we investigate differences in risk propensity across managerial and functional designations in a major oil company, BP Exploration, Inc. We present a model for measuring risk propensity, examine the results of a survey of 39 staff and supervisory personnel, and explore the implications of a divergence between individual risk propensities and the firm's corporate risk policy.
Highlights
The study of individual decision making under conditions of uncertainty has attracted much attention through most of this century
We present a model for measuring risk propensity, examine the results of a survey of 39 staff and supervisory personnel, and explore the implications of a divergence between individual risk propensities and the firm's corporate risk policy
Decision analysis is defined by Keeney [2] as "a formalization of common sense for decision problems which are too complex for informal use of common sense"
Summary
The study of individual decision making under conditions of uncertainty has attracted much attention through most of this century. The practical implication of the decision analysis axioms is the provision of a sound basis and general approach for including judgments and values in an analysis of decision alternatives This mathematical representation of decision making is well-suited for approximating individual risk propensities in the context of the organization. Kahneman and Tversky's [11] seminal work in "prospect theory" specifies several classes of choice problems in which risk-taking behaviors systematically violate the axioms of expected utility. These and other descriptive studies provide useful information about cognitive processes, decision making heuristics, and decision making biases prevalent among decision makers. In complex decision environments, such as corporate resource allocation problems, many decision makers prefer a rational and sound basis for decision making, but seriously violate the axioms of rational behavior in selecting among decision alternatives
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
