The Walker review and the Dynamics of Risk
Authors: Mannie Sher, the Tavistock Institute of Human Relations and Ali Gill, Crelos
The Walker Review of Corporate Governance in UK banks and other financial industry entities is
a recipe book, not the meal itself. It is a lot bolder and more innovative than first meets the eye.
But, the real work still has to follow.
It asks the pivotal question: how can we address risk more strategically and sustainably? What
must our minds and senses be alert to, especially when we need to overcome our own
resistance to confront the uncertain and unexpected?
Risk concerns the future. It is an assessment of expected gain or loss. Whilst, technically, the
value of those results may be positive or negative in general when we refer to risk management,
we tend to focus more on the potential harm that may arise either from incurring a cost (human,
financial or other) or by failing to attain some benefit, how ever that may be measured.
Framing is a fundamental problem with all forms of risk assessment. In particular, because our
brains get overloaded, we take mental shortcuts and the risk of extreme events is discounted
because the probability is too low to evaluate intuitively. As an example, one of the leading
causes of death is road accidents caused by drunk driving, partly because any given driver
frames the problem by largely or totally ignoring the risk of a serious or fatal accident. An event
that everyone agrees is inevitable may be ruled out of risk analysis due to greed or an
unwillingness to admit that it is believed to be inevitable. These human tendencies for error and
wishful thinking often affect even the most rigorous applications of risk management and should
be a major concern.
All decision-making under uncertainty must consider cognitive bias and cultural bias. No group of
people assessing risk is immune to "groupthink" – the unquestioning acceptance of obviously
wrong answers simply because it is socially painful to disagre