Fretting about Modest Risks is a Mistake

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Managers often engage in risk-averse behavior, and economists, decision analysts, and managers treat risk aversion as a preference. In many cases, acting in a risk-averse manner is a mistake, but managers can correct this mistake with greater reflection. This article provides guidance on how individuals and organizations can move toward greater reflection and a more profitable aggregate portfolio of decisions. Inconsistency in risk preferences across decisions is a costly mistake for both individuals and for organizations. Based on the article "Fretting about Modest Risks is a Mistake" by Matthew Rabin and Max Bazerman.