Extreme Behavioral Risk Management

Managing Fear During the Financial Crisis

A Division of ALLSector Technlogy Group, Inc.

Online at www.xbrm.com

In our day-to-day work, our firm helps clients make accurate behavioral assumptions to inform the development of policies, plans and exercises in crisis management and business continuity. The current financial crisis offers a unique opportunity to examine the role of behavior and extreme emotions in decision-making and problem-solving at the individual, organizational and societal levels. There is no doubt that fear is a driving force in the radical swings in the markets. But that same fear can also be impacting safety, productivity and performance on the job duirng a time of increased demands.

Fear is one of our most primal and powerful emotions. It can propel us into action and just as easily have us freeze like a deer in the headlights. Knowing how to harness and channel fear is not a precise science since so much of fear response in dictated by individualized factors. But there are some useful insights from behavioral research that can provide direction for executives and managers.

Fear left unchecked diminishes problem-solving and decision-making. It erodes morale and decreases employee loyalty and customer satisfaction. Fear is a powerful shaper of behavior. It is important to understand the role of fear in the current financial climate and anticipate its affect on employees, both in their personal and professional lives. In this week's Behavioral Risk Bulletin, we explore "Crisis Decision Theory" and its application to the financial crisis.