Neuro-finance Lab @APG · PDF fileNEURO-FINANCE LAB@APG A workshop on insights and a...
Transcript of Neuro-finance Lab @APG · PDF fileNEURO-FINANCE LAB@APG A workshop on insights and a...
NEURO-FINANCE LAB@APG
A workshop on insights and a demonstration of
brain analysis
Frank Hartmann
Ruud Hendriks
AGENDA
• Introduction & agenda 09.15 – 09.35: Frank Hartmann
Ruud Hendriks
• Different view on risk management 09.35 – 10.35: Ruud Hendriks
Break 10.35 – 10.55
• Studying the brain & EEG demo 10.55 – 11.55: Frank Hartmann
• Discussion (of theses) 11.55 – 12.15
5 June 2015
INTRODUCTION FRANK HARTMANN
• PhD University of Maastricht
• Since 2005: Rotterdam School of Management
• Professor of Management Accounting & Management Control RSM
Erasmus University
• Dean of Executive Education RSM
• Brain research in financial decision making
35 June 2015
INTRODUCTION RUUD HENDRIKS
• Career started by finishing education and training at “Koninklijk
Instituut voor de Marine (KIM)”
• As naval officer (submariner), participated in several submarine
operations/missions, including former Yugoslavia
• Since 1996 national and international management functions,
specialized in large complex change programs
• Since September 2011 at APG
• Program Manager Program Incasso
45 June 2015
GOAL OF THIS WORKSHOP
1. To give insight in the way we think and how we think to
influence our decisions
2. Some food for thought
55 June 2015
PROGRAM MANAGEMENT
& DECISION MAKING
Manage the unexpected
Ruud Hendriks
THE “EXPECTED”
• In Programs and projects we want to mitigate risks by:
– Plans
– Lessons learned
– Risk – logs
– …
Increase
predictability
“It’s been expected and
so its likely to happen”
75 June 2015
BUT WHAT ABOUT “THE UNEXPECTED”
• Anything could happen, and probably will
But how do we manage the
unexpected?
85 June 2015
“Be unpredictable to survive”
95 June 2015
SMCC (SHORT FILM)
• SMCC = Submarine Command Course
105 June 2015
PARADIGMA SHIFT
Deming Boyd
(PDCA) (OODA)
Deming Boyd
(Command/Control) (Information Based)
115 June 2015
OODA
• Allocating
attention
• Sense making
• Anomalizing
• Updating
• Interacting &
Communication
• Containing the
unexpected
• Resilience
K.Weick & K.Sutcliffe (2013)
125 June 2015
ALLOCATING ATTENTION
• Proactively
– Attention can be allocated to scan the environment looking for potential
problems
• Reactively
– Attention can be allocated in response to some sort of stimulus
Manage the flow of attention
135 June 2015
SENSE MAKING
• Discernment
– Appreciating the
significance of data
elements and its meaning
– Meaning is sensitive to
some details of the current
situation
Develop expertise
145 June 2015
ANOMALIZING
• Capability to avoid treating small
perturbations as normal
• Alertness to discrepant details
Mindful infrastructure guards against mis-
specifying, mis-estimating and
misunderstanding things
5 June 2015 15
UPDATING, INTERACTION &
COMMUNICATION
• Updating
– Ability to modify understanding of a situation either
• Situation has changed or evolved over time
• Initial assessment was flawed
Requires doubt
• Interaction & Communication
– Tasks and workflow interdependencies can create
ambiguity
– Ambiguity requires discussion and active listening
165 June 2015
CONTAINING THE UNEXPECTED
• Ability to delineate the boundaries of a
specific problem and encapsulate it
• Ability to work within the problem space
to begin to resolve the problem
175 June 2015
RESILIENCE
• Ability to properly adapt to stress and adversity
• Positive emotionality; effectively balance negative emotions with
positive ones
Treat as opportunity rather than threat
185 June 2015
OODA
195 June 2015
CASUISTRY
The Go-live moment of the new INC process
- The whole year major pressure to go live
- Point of no return has been passed
- No fallback scenario available
- External & Internal communications were informed and had
high expectations
- We went live, but after 3 days the STP-process was hampered
by,
- False parameters for the new (e.g. current) year
regarding Loyalis
What would you do?205 June 2015
CASUISTRY
Running for more than 2 years and then…
- DB connections randomly failed while running
- Vital steps in the process were skipped which relates
to:
- Slow performance
- Corrupt data base
What would you do?
215 June 2015
SHORT BREAK
225 June 2015
ACCOUNTANTS &
RATIONAL DECISION MAKING
A look into the brain
Frank Hartmann
245 June 2015
OVERVIEW
• Managing the unexpected
– The importance of risk management
– Can we (should we) model human decision making behavior?
– From command and control to free-format
• Unexpected aspects of management
– Brain analysis (EEG)
– Rationality and intuition
– Controllers’ fiduciary obligations
255 June 2015
RATIONAL DECISION MAKING
• Intuition and rationality are concepts that have occupied
thinkers about humanity for (literally) thousands of years
265 June 2015
PHINEAS CAGE
275 June 2015
RATIONAL DECISION MAKING
285 June 2015
NEUROSCIENCE
Dendrites
Axon
terminal
branches
Axon
Cell
body
Action
potential
Action potential causes an electric
current – detectable at scalp level
(EEG)
Active cell uses energy, supplied
through increased blood flow –
detectable through microwaves
(fMRI)
295 June 2015
NEUROSCIENCE
• The science that AO investigates neurobiological origins
of behavior
• Measures AO the activity of nerve cells (neurons) in the
brain
Motor cortex
305 June 2015
MEASURING BRAIN WAVES: EEG
With(out) bodily activity, brain
activity is observable – different
wave patterns signal different brain
states
Wave patterns change in reaction to
external stimulus – showing
increase or decrease of frequency
band
Event Related Desynchronization –
external stimulus distorts resting
state (stable) brain wave pattern in a
prespecified frequency band
Delta < 3.5 Hz
Theta 4-7 Hz
Alpha 8-13 Hz (visual cortex)
Mu 8-13 Hz (motor cortex)
Beta 14-30 Hz
Gamma 30-80 Hz
315 June 2015
FMRI LAB
325 June 2015
EEG LAB
335 June 2015
RATIONAL DECISION MAKING
• Are controllers rational?
345 June 2015
COMPANIES’ FAILURES
• Analyses of companies’ financial demise often point to
flaws in the boardroom or the functioning of the (internal)
audit system
• Normative theory on controllership suggests that
controllers should guard against goal-incongruent and
unethical managerial behaviors
• But can they?
355 June 2015
TENSION IN UNIT CONTROLLERS’ ROLES
• Decision making
support
– Requires
involvement
– ‘local consultant’
• Corporate
supervision
– Requires objectivity
– ‘corporate policeman’
365 June 2015
OUR STUDY
• Social pressure has been identified as an important
cause of controllers’ violations of their fiduciary roles
– Explicit social pressure
– Implicit social pressure
• Does a controller’s tendency to give in to social pressure
have a neurobiological origin?
– …is it hardwired?
375 June 2015
MIRROR NEURON SYSTEM
• Rizzollati (Parma, Italy)
• Accidental discovery in
1995
• Research on macaque
monkey motor neurons
• Ventral premotor cortical
area
385 June 2015
MIRROR NEURON SYSTEM
• Same neurons fire when executing and when observing
an action
395 June 2015
MIRROR NEURON SYSTEM
• Crucial in accumulation of experience
– By watching another animal perform an action, an animal can
emulate a task and potentially understand the intent behind the
action
• Social role
– Knowledge sharing - important to survive in hostile
environments
– No need for a mirror neuron system for solitary creatures
40
HUMAN MIRROR NEURON SYSTEM
415 June 2015
HUMAN MIRROR NEURON SYSTEM (HMNS)
• hMNS functioning accounts for some forms of social
(dys)functioning
– Autism
– Empathy
– Imitation
– Theory of mind
– Perspective taking
425 June 2015
THE HMNS AND ‘EMPATHY’
• Empathy
– The ability to identify with the feelings, thoughts, or mental
states of other people (putting yourself “in the shoes” of
someone else)
• Humans are normally able to do this quite well once fully
developed (autistic people seem to have a lack of
empathy)
435 June 2015
THE HMNS AND AUTISM SPECTRUM
DISORDER
• DSM V (Autism Spectrum Disorder – 299.00, F84.0)
– Persistent deficits in social communication and social interaction
across multiple contexts, as manifested by the following (…):
• Deficits in social-emotional reciprocity, ranging, for example,
from abnormal social approach and failure of normal back-
and-forth conversation; to reduced sharing of interests,
emotions, or affect; to failure to initiate or respond to social
interactions.
• Deficits in nonverbal communicative behaviors used for
social interaction (…) poorly integrated verbal and nonverbal
communication (…)
445 June 2015
THEORY
• Does a controller’s tendency to give in to social pressure
have a neurobiological origin?
– We considered that the controller’s ‘empathic ability’ would
predict influencability under emotional social pressure
• Hypothesis:
– hMNS activation predicts tendency of controllers to compromise
fiduciary duties – especially when superior’s fate is at stake
455 June 2015
METHOD: EEG MEASUREMENT
465 June 2015
METHOD: CONTROLLER BEHAVIOR
• Six scenario’s describe professional situations a
controller may face
• Likert-scaled question: ‘would you go along with this’
Ben is BU manager and direct supervisor of BU controller Claire. Their
company is starting the budget rounds for the coming year. As BU
manager, Ben is responsible for meeting the target, which the BU will fail
to meet this year due to unforeseen market circumstances. Ben fears the
risk that the BU will miss its target again next year. This could cost him his
job as BU manager. Ben tells Claire he is very afraid of losing his job,
which would put him in serious personal trouble. He therefore wants to
include a safety margin in next year’s budget proposal by submitting a
lower sales budget than the best estimate. HQ do not have sufficient
market insight to detect this.
475 June 2015
FINDINGS & CONCLUSIONS
• Controllers whose hMNS shows more activation give in
more to emotional pressure
• Neurobiological origin of controller competences
– Stereotypical picture of ‘accountant’
– Implications of effectiveness of HR- and corporate ethics
policies
485 June 2015
THESES
A workshop on insights and a demonstration of
brain analysis
Frank Hartmann
Ruud Hendriks
THESIS 1
Decisions are more often based on intuition
than on ratio
505 June 2015
THESIS 2
Risk avoidance requires “fast thinking”
instead of “slow thinking”
515 June 2015
THESIS 3
Our current control systems are unable to
manage the unexpected
525 June 2015
THESIS 4
Our current education of controllers does
not prepare well to manage the unexpected
535 June 2015
THESIS 5
Risk management requires more
complicated control systems
545 June 2015
THESIS 6
Risk management requires a more positive
attitude towards ‘risk’
555 June 2015
QUESTIONS?
Vragen
Ερωτήσεις Fragen
Domande
Preguntas
Perguntas
Questions?
CwestiwnQuestions
565 June 2015