How do you measure it? Can you turn it around?
‘How?’ is becoming as important a question as how much? in investors’ regulators’ and customers’ appraisals of businesses. Deborah Hawkes reports from the New Economic Knowledge Services Regulation and Trust conference.
When the Nobel Committee announced last month that Richard Thaler had been awarded the 2017 prize for economics, citing his work on behavioural economics, many in the business of regulation and risk must have shared a sense of vindication.
Behavioural economics has been at the forefront of change in economic policy since the 2007 crash showed that neo-classical economic models, which often characterised the consumer as a set of numbers and averages, did not reflect the real world. Along with bankers and industry chiefs the regulators took the blame when it became clear they failed to rein in risky behaviour from board level downwards. Much work has been done in the past ten years to look at why regulators made those errors and how to encourage ethical behaviour and culture change instead.