The paper notes that: “we often do not follow a sound
process due to common judgment traps and tendencies that can lead to bias. Some
of these tendencies are judgment shortcuts that help simplify a complex world
and facilitate more efficient judgments. However, these shortcuts sometimes can
lead to suboptimal judgments. The judgment traps and tendencies are systematic—in
other words, they are common to most people, and they are predictable.”
It also points out that: “By consistently following a sound
judgment process, understanding where directors and management are vulnerable
to predictable traps, and appropriately challenging their own judgments and the
judgments of those they are charged with overseeing, directors can improve
their oversight and monitoring of the organization’s strategies and risks,
including the risk of fraud. Following a better judgment process translates to
improved risk management and better business outcomes.”
Exhibit 1 (on page 3 of the Paper) illustrates a model of a good judgment process.
The steps in this process are simple to understand. Although the steps are a
representation of the process to follow, the Exhibit does not depict how people
actually make judgments. It provides a helpful context to illustrate where
judgments can go wrong. The reality is that in a world of high-stake decisions,
deadlines and limited capacity, the judgments of even highly educated, capable
people are vulnerable to common, systematic traps and predictable biases.
