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IAI Actuarial Core Principles · Business Management · Strategy, competitive advantage, strategic decision process and PEST analysis

The chief actuary of an Indian insurer notices that the board approved a product launch after only one senior director's view was considered; the other directors deferred to him, no dissenting analysis was sought and the team felt pressure to agree. Which weakness in the decision process is most clearly illustrated?

The weakness is groupthink combined with dominance by one individual. Directors deferred, no dissent was sought and members felt pressure to agree, so assumptions went unchallenged and the evaluation of the product launch was weak. The scenario gives no evidence of excess modelling, PEST misuse or too many options.

  1. AGroupthink and dominance by a single individual, reducing challenge and quality of evaluationCorrect
  2. BExcessive use of quantitative modelling
  3. COver-reliance on PEST analysis
  4. DLack of a mission statement
  5. Too many alternatives generated

Explanation

Deference to one dominant person with no dissent and pressure to conform is the classic pattern of groupthink. It undermines evaluation because assumptions are not challenged. The scenario describes nothing about modelling, PEST, mission or an excess of options.

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