Escaping the Traps for Logicians: Towards Decision- Making Competency in Risk Management

Abstract

“The financial markets, seen by many as the most efficient and farsighted, should rapidly evolve to near-optimality due to the huge stakes and enormous talent brought to bear. Yet even the highly sophisticated hedge funds [like LTCM, C.H.] bear the scars of self-inflicted wounds from open-loop thinking [see 5.1.; because their risk models have missed to consider that other actors might pursue the same or a similar strategy as an input to the models; C.H.].” (Sterman, 2000: 697). At best, the result is inefficiency; at worst, it is ineffectivity which hurts the organization, the people in it, and not too rarely third parties or even the larger society.