Anchoring Bias in Risk Assessment

Correct Answer: Anchoring Bias

The scenario describes a clear example of Anchoring Bias, which occurs when people rely too heavily on the first piece of information encountered (the anchor) when making decisions. In this case, project teams are using the 2020 global crisis as their reference point (anchor) for evaluating current pandemic-related risks. They're fixating on these past maximum losses as their primary reference point, which influences their current risk assessments. The other options are less accurate because: The recency effect refers to the tendency to remember and emphasize recent events, but doesn't capture the specific behavior of using a reference point as a basis for estimates. Historical data overreliance syndrome is not a recognized term in project management and risk assessment. Comparative reference point fixation is a made-up term that, while somewhat describing the situation, is not the established concept that explains this behavior. Anchoring Bias most precisely describes the cognitive bias where people attach their estimates to a specific reference point, even when that reference point may not be relevant to the current situation.

Correct Answer: Anchoring bias

The scenario describes a clear example of anchoring bias, where people fixate on an initial piece of information (the 15% from an old project) to make subsequent judgments. This cognitive bias occurs when team members use the first piece of information (the anchor) as a reference point for all future decisions, even when it may not be relevant to the current situation. The example perfectly illustrates anchoring bias because: 1. The 15% figure is taken from an unrelated project 2. It's from five years ago (outdated) 3. Team members are using it as a baseline for ALL calculations While 'starting point estimation bias' is related to anchoring, it's a less precise term. Recency bias actually refers to giving too much weight to recent events, which isn't the case here since they're using old data. The availability heuristic relates to making decisions based on easily remembered information, which isn't the main issue in this scenario. The critical problem is that the team is anchoring their estimates to an arbitrary percentage from an unrelated project, limiting their ability to make accurate risk assessments for their current situation.

Correct Answer: Anchoring bias

Anchoring bias is the correct answer as it precisely describes the cognitive bias where people rely too heavily on the first piece of information they receive (the anchor) when making decisions. In this scenario, the team members are using previous market trends as their anchor point and adjusting their impact estimates based on these historical figures. This is a classic example of anchoring bias, where initial reference points strongly influence subsequent judgments. The other options are less accurate: 'Historical representation bias' is not a standard cognitive bias term and oversimplifies the phenomenon at hand. 'Confirmation bias' relates to seeking information that confirms existing beliefs, which is not the primary issue here. 'Availability heuristic' refers to overestimating the probability of events based on how easily they come to mind, which doesn't match the described behavior of adjusting estimates based on specific historical data.