FRM Part II · FRM Exam Part II · Risk Identification
During a scenario workshop, the first expert estimates a severe fraud loss at USD 40 million, and the senior executives then quickly agree with that figure without discussion. Which bias is most clearly at work?
This is anchoring bias. The first estimate of USD 40 million became a reference point, and the other participants adjusted insufficiently away from it. Collecting independent estimates before group discussion is a standard way to reduce this effect in operational risk scenario workshops.
- AAvailability bias
- BAnchoring biasCorrect
- CConfirmation bias about recent events
- DOverconfidence in the tails
Explanation
Anchoring occurs when an initial estimate heavily influences later judgments, so participants cluster around the first number offered. Availability bias would relate to recent memorable events. The scenario describes sequence-driven convergence, which points to anchoring. Structured techniques such as independent estimates before discussion can mitigate it.
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