"Executives tend to overweigh potential losses over gains, which leads them to pass on beneficial opportunitiesâeven in stable times, this aversion intensifies."
"In a survey, executives were willing to accept only a 19% chance of loss for a $10 million investment, highlighting extreme loss aversion."
Executives demonstrate a tendency to overweight potential losses compared to gains, leading them to miss beneficial investment opportunities. A McKinsey survey showed that executives preferred significantly lower risk profiles than would be rationalâonly a 19% acceptance of loss for a $10 million investment meant they shied away from opportunities. This loss aversion is compounded by market instability and affects decision-making across hierarchical organizations. Even small investments evoke similar risk-averse behaviors, undermining potential growth and limiting positive outcomes for stakeholders.
#executive-decision-making #loss-aversion #investment-strategies #risk-management #corporate-governance
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