Awareness of risk, lying at the initial stage of risk management, is incorporated in many fields of studies, like health control, natural disaster studies and financial collapse researches. However, given the behavioural distractions in creating awareness, awareness of such risks seldom is appropriate beforehand. Theoretically, had an awareness of risk been properly examined, pities, losses and hazards could have been avoided to a large extent. In practice, given inherent subjectivity, selecting appropriate ideas in advance can be much harder than understanding the situation afterwards. Though scientific views argue that improvements could have been made by modifying quantitative models, obstacles underlying such a process still include subjective judgements. Therefore, whilst on surface amendments are arguably achievable, in reality they can be highly limited. The rest of the passage will try to illustrate the hidden effects of human behaviours on awareness of risk during 2008 financial crisis. Admittedly, however, plausibility still exists in partial improvements beforehand.
2008 Financial Crisis seemed to come out of blue and shocked the whole world in the first place but was soon concluded by experts as a consequence of systemic risk. (Federal Reserve Bank of Atlanta, 2009) Characterizing such a risk are three consequences, including universal losses triggered by a single event (IBS, 2001), revelation of hidden correlations among financial institutions (Kaufman and Scott, 2003), and occurrence of a less optimal transition from one equilibrium to another (Hendricks, 2009). This systemic risk also draws attention to previously hidden risks and therefore perception of risks increased on an individual basis (Roszkowski and Davey, 2010). For regulators and institutions, the focus shifts to correlations between counterparts from decision making as individuals.
Some researchers conclude that the 2008 financial tsunami is avoidable, contrasting the intuitive perception that such crisis was completely unpredictable previously. This argument based on the fact that harbingers for such a crisis did exist beforehand and that had those predecessors been taken into consideration seriously, such a catastrophe would never have happened. (Financial Crisis Inquiry Commission, 2011: xvii) Though this argument can be valid for the existence of an incubation period, for this statement, the assumed causal relationship might need further scrutiny between the availability of information and being able to avoid such a crisis. A perfect rational decision making system is assumed here in choosing data; however, this has been proved hard to implement. (Ansell, 2013) After all, people react according to perceived facts, not an entity using pure and all information. Taking psychological and behavioural factors into consideration, the possibility can decrease greatly of using information free from cultural or emotional impact.
Straight forwardly, such a catastrophe could...