Risk Taking In Foreign Policy Decision Making

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Risk Taking In Foreign Policy Decision Making

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Discuss about the Risk Taking In Foreign Policy Decision Making.

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Definitions

Overconfidence

Overconfidence is the quality possessed by human or animal which one becomes too confident in doing something. Also it can be defined as excessive confidence. Some of the good examples of overconfidence include someone who thinks his sense of direction is better than actually is. The individual could end up-showing over confidence by continuing with his long trip without a map or asking for direction from other people and as a result he ends up getting lost on the way. Another example is someone who thinks he is smatter in the business than he actually is. The person ends up making concrete decision on his business without consulting others this ends up making loss which he would have made if he consulted his friends (Demir, 2012).

Memory bias

In psychology and cognitive science, memory bias can be defined as a cognitive bias which enhances or impairs the recall of the memory (this means either the chance that the involved memory will be recalled, or it will take amount of time for the memory to be recalled, and sometimes both may take place), or sometimes affects the content of the reported memory in the long run. Currently, there are different types of memory biases which include boundary extension, changes bias, childhood amnesia, confirmation bias, context effect and generation effect among others (Walker, 2013).

Self-handicap

Self-handicapping can be defined as a cognitive strategy by which many people avoid making an effort in doing something so that they can avoid potential failure which would end up hurting their self-esteem in the future. Self-handicap was first theorized by a researcher called Edward E. Jones together with his college Steven Berglas who argued that self-handicaps must be regarded as an obstacle created, or which sometimes may be claimed by the individual who might avoid and fear of failing performance (Koch, 2012).

How each affect investors
Over confidence may be good and sometimes risk to the investors. Lets first look the good thing about the overconfidence to the investors. First an investor may en-up pursuing something which others might fear to invest on (Faunce, 2014). An investor might decide to pursue something which other investors might fear to invest on due to involved risk. As a result of investing alone in the environment, the investor may end up making supernormal profit out of this. The over-confidence helps the investor in this situation. However, the risk involved on this is the investor may end up losing all her investments if the risk involved appears.
Memory bias may end-up making an investor lose all her debts form the business. This is because he or she could not remember all the people he had given some money. Unlike overconfidence, there is no positivity associated with memory bias in a business.
Like over-confidence in the business environment investors with self-handicap traits may end up gaining or losing. A person may fear to do something and at the long last that thing end-up causing a lot of harm to all those who did it. On the other hand, an investor may fear to do something while all other who did it in the long last ends up gaining a lot. In this case an investor may end up remaining at per while others are making profits thus regarded as a loss (Kent Baker, 2017).
How to minimize the risk for each
Overconfidence can be controlled by consulting others in the business environment and making concrete decision which will end up benefiting the business. Another way to solve this is by assessing all the possible alternatives in the business and taking the one with minimal risks instead of taking huge risk (Shepherd, 2015). Memory bias can be treated using drugs in the hospital. In the case of Self-handicap, the same remedies which can be used to solve over-confidence can be used to solve Self-handicap cases. This involves assessing the business and working on something which does not involve a lot of risks in the long run.
Open Ended Questions
I think the key factors to a successful investor who uses all the above skills are independent thinking, paying attentions to all business fundamentals and long-term planning. These factors help him to make sound decision which helps in avoiding unnecessary risks at the long last.
If I was to sell a business investment to an investor which offers 6% returns and also is associated with 2% risk, I would convince the investor to concentrate on returns from the business. Basically, he should be to blinded by the associated risks as every business has some involved risks. If he plans well, he would avoid the loss; this is because failing to plan is planning to fail in the long last.

References
Demir, I. (2012). Overconfidence and Risk Taking in Foreign Policy Decision Making. Not Known: Cham Springer International Publishing .
Faunce, W. A. (2014). Work, status, and self-esteem : a theory of selective self investment. Lanham, Md.: University Press of America.
Kent Baker, ‎. R. (2017). Financial behavior : players, services, products, and markets. New York: Oxford University Press.
Koch, K. (2012). Self-handicapping and reactions to feedback : does a handicap buffer the threat to self? The Auk, v122 n3 (07 2005): The Auk, v122 n3 (07 2005).
Shepherd, D. A. (2015). A Psychological Approach to Entrepreneurship : Selected Essays of Dean A. Shepherd. Cheltenham: Edward Elgar Publishing.
Walker, H. M. (2013). Memory biases : choice-supportive bias, functional fixedness, gender differences in. Boca Raton, Fla. ; London: CRC Press/Taylor & Francis.

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