Example Of Essay On Monitoring Safeguards Internally And Externally

Introduction

Risk management can be defined as identification, assessment, and prioritization of risks. These processes are followed by the economic and coordination of resources to mitigate the impact of an unfortunate occurrence of a risk . When the issues of risk management are under consideration, bias is a critical issue that may lead to subjective analysis of risks. Bias is defined as the inclination of one’s temperament or holding a partial perspective about an issue and the inclination is accompanied by the refusal to consider possible other merit alternatives . When assessing the risks that may affect a project or even a person, bias should be left out as much as possible since it will definitely affect the results of the assessment. The essay aims at identifying a bias at a personal level that may inhibit a person when making an objective decision concerning a risk.

Risk

In assessing a risk, the individuals who do it base their decision on the experiences, speculation and objective reasoning . For example: in insurance, the underwriters mostly base the risks that may affect the insured on how frequent the risk has proven to happen. The premiums to be charged are based on this analysis, and the insured does not have any choice but to pay the rate determined. Biases come in between in making decisions that will affect us or the entities associated with us. For example: when deciding what rate an insurance company may charge the insured, the underwriter may decide to increase the premiums just to increase the profits of the company. Implicit bias is one bias that every individual has since they are pervasive in nature and it refers to the stereotype or attitudes that affect our action, decision and understanding in a manner that is unconscious. The implicit bias leads us not to make objective decisions about any issue.
A report on the risks that affect an entity is a critical report that requires attention and perspective all the principal players. The assessors should be those who do not have a stake or even have any prospective interest to have an interest in the entity. The decision made by the majority of the members of the team should be given a chance to be analyzed by another independent body just to be sure that the report can be trustworthy . The bias factors that are considered implicit are present deep in the subconscious mind, and anyone cannot correctly pinpoint them and it is contrary to explicit biases that one is aware of and can be able to state them without hesitation. Both types of biases lead to decisions that are not objective or rational. It is simple to deal with explicit biases since one can be able to determine a strategy to eliminate them and dealing with implicit bias is very hard since one is not able to know what he is up against .
The potential bias that can best be associated with me is implicit bias. Despite having various biases that are explicit, most decisions that are made are based on implicit bias and not explicit bias. Issues that will affect me tend to gain the better side of my human nature and they affect my decisions. In a risk analysis scenario, the bias that may affect my rational thinking is the experience. Most of the cases, risks that happen tend to diverge our thinking in an irrational way, and we end up deciding on a situation just because we had experienced it before . For example, the risk that may occur when one starting a business mostly depends on the environment the business is situated. When an entrepreneur opens a business the first thing to think of is how to make the profit. He does not consider the environment to which the business is situated. Ignoring the environment will lead to the occurrence of a risk. The experience that an entrepreneur has gained teaches how to deal with issues. The experience will subjectively lead him to making a decision rather than the rational consideration of the environment .

Strategy

At personal level, the explicit bias that affects me such as experience from the previous encounters, does not lead me to making final decision. The bias is just a consideration that I have to have at the back of my mind when analyzing the situation at hand. When you have experience dominating all your decision about a risk, then you report about the risk will be shallow . Inclusion of the experience that you have in ascertaining a risk prospect will help in determining the best possible what if scenario that may occur in reporting a risk. In the case of the hurricane, the past experiences will only be used to guide on the areas that are worst hit. Analysis of the progress done in the areas is crucial to making a decision that is objective about the losses that are possibly expected to occur . In using the history of hurricane, I will not be totally depending on the past experiences but all the current situation of the areas that have a history of been affected by the hurricane.
When I consider the experience and the actual situation on the ground, it will help me come up with an objective report is the combining the two and analyzing them as if they are all new to me. Recognition of factors that can lead to irrational decisions is one important way of eliminating bias when discussing the issues of risks in a business or social environment because you will be able to monitor your biases before making a crucial decision that will be irrational and subjective.

Conclusion

Risk assessment should never have bias in any way and reports done on issues of risk are crucial since they are used in making strategic decisions. The ability of an assessor to effectively eliminate bias will lead to accurate risk assessment and, as a result, no losses to investor or businesses. Despite the presence of implicit bias, a second opinion on an issue can be useful in determining the possibility of biases. When more than one person is used to analyze a situation, the possibility of an occurrence of a risk due to the report been biased is eliminated. Risk managers should be able to see situations from a different perspective and not to analyze the risks from their opinion but in a factual way. Being open minded, helps in accommodating new views and opening one's mind to perceive situations from an entirely new perspective.

References

Baumeister, R. F., & Finkel, E. J. (2010). Advanced social psychology: The state of the science. Oxford: Oxford University Press.
Hopkin, P. (2012). Fundamentals of risk management: Understanding, evaluating and implementing effective risk management. London: Kogan Page.
Iverson, D. (2013). Strategic risk management: A practical guide to portfolio risk management. Singapore: Wiley.