Beyond the Numbers - A Study on the Effect of Managerial Judgment on Operational Risk
(2024) BUSN79 20241Department of Business Administration
- Abstract
- Abstract
Title: Beyond the Numbers - A Study on the Effect of Managerial Judgment on Operational Risk
Hand-In Date: 24th May 2024
Seminar Date: 30th May, 2024
Course: BUSN79 - Degree Project in Accounting and Finance
Authors: Christian Brams & Felix Walter Persson
Advisor: Elin Funck
Five Keywords: Managerial judgment, Operational risk, Heuristics, Decision-Making Process, Economic- and Bounded- Rationality.
Purpose: The purpose of this study is to examine how managerial judgment affects decisions regarding operational risk within financial institutions. The study takes an exploratory perspective to examine the internal decision-making processes of financial institutions. The study aims to identify where and how... (More) - Abstract
Title: Beyond the Numbers - A Study on the Effect of Managerial Judgment on Operational Risk
Hand-In Date: 24th May 2024
Seminar Date: 30th May, 2024
Course: BUSN79 - Degree Project in Accounting and Finance
Authors: Christian Brams & Felix Walter Persson
Advisor: Elin Funck
Five Keywords: Managerial judgment, Operational risk, Heuristics, Decision-Making Process, Economic- and Bounded- Rationality.
Purpose: The purpose of this study is to examine how managerial judgment affects decisions regarding operational risk within financial institutions. The study takes an exploratory perspective to examine the internal decision-making processes of financial institutions. The study aims to identify where and how managerial judgments can lead to potential misjudgments. Furthermore, the study intends to examine organizations' strategies to avoid these mistakes and enhance the decision-making process.
Methodology: The research methodology for this thesis is qualitative with an exploratory element. Firstly, a literature review was conducted. Secondly, empirical data was collected via semi-structured interviews. Lastly, the empirical data was put into relation with the theories examined in the literature review in order to answer the purpose of this study.
Theoretical perspectives: This thesis explains the decision-making process, followed by an explanation of operational risks within financial institutions, Managerial Judgment, the Bounded Rationality Model, and Economic Rationality. Lastly, the heuristics were explained.
Empirical Foundation: This thesis's empirical material was gathered through semi-structured interviews with nine professionals from financial institutions who work with operational risk.
Conclusions: Within the scope of this thesis, managerial judgment has been found to affect the decision-making process both positively and negatively. Incorporating managerial judgment enables faster and more accurate decisions but can increase risks due to overconfidence and reliance on junior analysis. A model describing four decision-making stages identifies biases and heuristics affecting each stage. Financial institutions can enhance decision-making by fostering a risk-aware culture, leveraging the experience of decision-makers, and maintaining a rigorous corporate structure to balance judgment with structured processes. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9168615
- author
- Walter Persson, Felix LU and Brams, Christian LU
- supervisor
-
- Elin Funck LU
- organization
- course
- BUSN79 20241
- year
- 2024
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Managerial judgment, Operational risk, Heuristics, Decision-Making Process, Economic- and Bounded- Rationality.
- language
- English
- id
- 9168615
- date added to LUP
- 2024-08-07 17:00:08
- date last changed
- 2024-08-07 17:00:08
@misc{9168615,
abstract = {{Abstract
Title: Beyond the Numbers - A Study on the Effect of Managerial Judgment on Operational Risk
Hand-In Date: 24th May 2024
Seminar Date: 30th May, 2024
Course: BUSN79 - Degree Project in Accounting and Finance
Authors: Christian Brams & Felix Walter Persson
Advisor: Elin Funck
Five Keywords: Managerial judgment, Operational risk, Heuristics, Decision-Making Process, Economic- and Bounded- Rationality.
Purpose: The purpose of this study is to examine how managerial judgment affects decisions regarding operational risk within financial institutions. The study takes an exploratory perspective to examine the internal decision-making processes of financial institutions. The study aims to identify where and how managerial judgments can lead to potential misjudgments. Furthermore, the study intends to examine organizations' strategies to avoid these mistakes and enhance the decision-making process.
Methodology: The research methodology for this thesis is qualitative with an exploratory element. Firstly, a literature review was conducted. Secondly, empirical data was collected via semi-structured interviews. Lastly, the empirical data was put into relation with the theories examined in the literature review in order to answer the purpose of this study.
Theoretical perspectives: This thesis explains the decision-making process, followed by an explanation of operational risks within financial institutions, Managerial Judgment, the Bounded Rationality Model, and Economic Rationality. Lastly, the heuristics were explained.
Empirical Foundation: This thesis's empirical material was gathered through semi-structured interviews with nine professionals from financial institutions who work with operational risk.
Conclusions: Within the scope of this thesis, managerial judgment has been found to affect the decision-making process both positively and negatively. Incorporating managerial judgment enables faster and more accurate decisions but can increase risks due to overconfidence and reliance on junior analysis. A model describing four decision-making stages identifies biases and heuristics affecting each stage. Financial institutions can enhance decision-making by fostering a risk-aware culture, leveraging the experience of decision-makers, and maintaining a rigorous corporate structure to balance judgment with structured processes.}},
author = {{Walter Persson, Felix and Brams, Christian}},
language = {{eng}},
note = {{Student Paper}},
title = {{Beyond the Numbers - A Study on the Effect of Managerial Judgment on Operational Risk}},
year = {{2024}},
}