Groupthink and Pre-transaction risk: Difference between pages

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imported>Doug Williamson
(Expand to align with study material. DTM U2. 2.2 p65. FX risk identification and assessment 2016.)
 
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''Behavioural skills - avoiding cognitive bias - group confirmation bias''.
''Foreign exchange risk management''


Groupthink is a form of dysfunctional decision-making, resulting from an excessive focus on harmony or conformity within a group, at the cost of reaching consensus decisions without enough critical evaluation.
1.


It is closely related to confirmation bias.
Pre-transaction foreign exchange risk arises from needing to commit to a price before actually entering into transactions or commercial agreements.


For example, an exporter may need to publish a price list in the currency of its customers' local market.


Solutions to groupthink include increasing diversity in the group.
Pre-transactional currency exposure also exists when an organisation tenders for a contract priced in a foreign currency, or where there are associated foreign currency costs, for example for materials, labour or other operational inputs.


Some practitioners do not identify pre-transaction risk as a separate class of risk, rather considering it to be a shorter-term type of economic exposure.


:<span style="color:#4B0082">'''''Use your own judgement in the New Normal'''''</span>


:"It’s tempting to see the release from [Covid] lockdown as the corporate equivalent of going back to your favourite restaurant.  
2.


:For many businesses it won’t be anything of the kind.
The same as Contingent risk as applied to currency management.
 
:Here’s how to make better choices to navigate the new normal...
 
 
:Because we want something to be so doesn’t mean it will be.  
 
:Some of us are pessimists, some optimists, and it’s more comfortable talking to those we agree with.
 
:These feelings should not get in the way of a cool look at the realities.
 
:Property company Shaftesbury, heavily involved in problematic London retail areas, talks about strategic acquisitions and selective disposals.
 
:Avoid wishful thinking or groupthink."
 
:''Sir Andrew Likierman, professor of management practice, London Business School - The Treasurer, Issue 2, June 2021, p39''




== See also ==
== See also ==
* [[Acquisition]]
* [[Contingent risk]]
* [[Affinity bias]]
* [[Currency risk]]
* [[Bandwagon bias]]
* [[Economic exposure]]
* [[Behavioural economics]]
* [[Transaction exposure]]
* [[Behavioural skills]]
* [[Choice supporting bias]]
* [[Cognitive bias]]
* [[Confirmation bias]]
* [[COVID-19]]
* [[Critical evaluation]]
* [[Default bias]]
* [[Diversity]]
* [[Dunning-Kruger effect]]
* [[Emotional intelligence]]
* [[Executive coaching]]
* [[Hindsight bias]]
* [[Horizon scanning]]
* [[Lockdown]]
* [[Maslow's hammer]]
* [[Objectivity]]
* [[Optimism bias]]
* [[Reactance bias]]
* [[Self-investment bias]]
* [[Self-serving bias]]
* [[Social bias]]
* [[Source bias]]
* [[Status quo bias]]
* [[Working effectively with others]]


[[Category:Commercial_drive_and_organisation]]
[[Category:Influencing]]
[[Category:Self_management_and_accountability]]
[[Category:Working_effectively_with_others]]
[[Category:Financial_management]]
[[Category:Knowledge_and_information_management]]
[[Category:Planning_and_projects]]
[[Category:The_business_context]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Risk_reporting]]
[[Category:Treasury_operations_infrastructure]]

Revision as of 14:03, 8 March 2017

Foreign exchange risk management

1.

Pre-transaction foreign exchange risk arises from needing to commit to a price before actually entering into transactions or commercial agreements.

For example, an exporter may need to publish a price list in the currency of its customers' local market.

Pre-transactional currency exposure also exists when an organisation tenders for a contract priced in a foreign currency, or where there are associated foreign currency costs, for example for materials, labour or other operational inputs.

Some practitioners do not identify pre-transaction risk as a separate class of risk, rather considering it to be a shorter-term type of economic exposure.


2.

The same as Contingent risk as applied to currency management.


See also