Page 157 - COSO Guidance

Enhancing Board Oversight: Avoiding Judgment Traps and Biases | 9

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Common Judgment Tendencies and related Biases
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Boards of directors are regularly charged with making shortcuts that are efficient and generally effective, but
challenging judgments in an environment characterized because they are shortcuts, they can lead to biased
by significant complexities, uncertainties, and pressures. judgments. These shortcuts are techniques that we all
In such an environment, where both efficiency and use, often unknowingly, to help cope with the complex
effectiveness are at a premium, it is important to environments in which we operate. As a quick example
understand where people are most likely to become of a simplifying judgment shortcut, when crossing a
vulnerable to systematic, predictable judgment traps and city street, say in New York City, some people don’t wait
biases. So far, we have discussed some common traps until they get a walk sign; instead, they move through
that can derail a judgment process, especially in group intersections by quickly looking to the left for oncoming
settings, and the importance of proactively identifying and traffic. If the coast is clear, they will take a step out into the
considering alternate frames. street and then look to the right for traffic coming the other
way. This is a very efficient and, often, effective shortcut
A formal judgment process like that depicted in exhibit 1 strategy. Over time, it becomes an unconscious, automatic
provides steps to good judgment when making important part of how some people cross the street in a busy U.S.
judgments. When making these kinds of judgments in a city. However, if they were to use this shortcut strategy in
complex world, however, individuals often unconsciously London or other cities where cars are driven on the other
fall prey to motivational biases and sometimes use side of the street, the consequences could be fatal.

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