Loading component...
At a glance
Cognitive bias is often treated as a theoretical concern, yet its influence on accounting, finance and leadership decision-making is both practical and pervasive.
In a recent episode of the INTHEBLACK podcast, applied psychologist Dr Victor Goh Weng Yew examines how unconscious mental shortcuts shape judgement in professions that depend on evidence, accuracy and public trust.
Brain shortcuts
Cognitive biases, Goh explains, stem from the brain’s reliance on heuristics. These are shortcuts that allow people to process information efficiently, but they come with risks.
“Cognitive biases are a large family of flaws in thinking that most humans are susceptible to,” he says. While heuristics help people navigate complexity, they can also lead people to flawed decision-making “and that is when the heuristic that we have becomes known as a cognitive bias”.
"Individuals tend to disregard information that disproves their own worldview or goes against what they believe to be true."
In high-pressure, detail-oriented fields such as accounting and finance, certain biases surface repeatedly. Drawing on his experience consulting with organisations, Goh identifies “anchoring bias, confirmation bias, loss aversion … as well as an overconfidence bias” as particularly common.
These tendencies intensify in environments where mistakes feel unacceptable. “When you cannot make a mistake, that is when confirmation bias, anchoring biases and availability heuristics come into play much more,” he notes.
Embedded beliefs
Confirmation bias poses significant ethical and professional risks. Goh describes it as “the tendency for people to seek out information that already confirms their pre-existing beliefs”. The danger, he says, lies not only in what is sought, but in what is dismissed.
“Individuals tend to disregard information that disproves their own worldview or goes against what they believe to be true,” he says. In accounting and finance, this can erode evidence-based judgement, because “you are no longer working based on evidence, but primarily on perception and emotions … and the consequences could lead to financial losses”.
How to intercept bias
Organisational culture plays a decisive role in managing bias. High-pressure cultures can encourage narrow thinking, while deliberate challenge can counter it. Goh cites a “quite brilliant” idea that some Japanese organisations use: they appoint a devil’s advocate in every meeting, whose job it is to point out any potential issues in the group’s decision-making.
At an individual level, vigilance matters most. “If everything looks great to you, that is when you should be the most cautious,” Goh advises. “You have to start questioning and saying, ‘Am I missing something? Is my perspective too one-sided?’ That’s one of the things that individuals can do to safeguard themselves against cognitive biases.”
