THE INFLUENCE OF THE HUMAN FACTOR ON RISK MANAGEMENT IN ECONOMICS

Abstract

Behavioral economics is gaining great importance in the modern world because the human factor is an integral part of economic activity and is even at the epicenter of business processes. Most people reach decisions deviating from a rational model of behavior. Company leaders and managers are still people in the workplace, with the same decision-making patterns as they have in everyday life. That is, the human factor is transferred to economic activity, along with irrational approaches that affect business and its processes arising from it, such as corporate governance, strategic management, budgeting, accounting, and many others. The world is not constant uncertainty and instability, which make a person even more irrational in such conditions as a result this affects economic activity and its development. Traditional economics and conservative postulates are not relevant in the modernized world, because subjects of market relations constantly make decisions that contradict rational approaches. Therefore, the study of human psychology and interaction with various spheres is necessary at the present time, when there are a large number of global events, such as pandemics, wars, and natural disasters. The economy, like the world, has a growing tendency towards rapid development. Scientists are faced with the task of updating economic theory, taking into account the latest research and modern directions, for example, the influence of the human factor on risk management in economic activity. Based on models of human behavior, it should be understood that economic agents do not behave rationally in market activity. This direction needs further research and optimization. The following research methods were used in the work: observation, comparison and generalization. Most people are subject to emotions and sometimes cannot control them in everyday life, and this is also reflected in making economic decisions. Emotions provoke irrational behavior, which is reflected in the conduct of business. Therefore, it was decided to investigate the influence of the human factor in risk management at enterprises, namely at the level of top management of companies when choosing to invest in specific projects, as well as interacting with each other. The article reveals various aspects of the global topic for its further development. The work provided specific recommendations on how to reduce the irrational influence of the human factor. Recommendations for optimization and increasing the level of reliability of business processes are also provided. It was concluded that research in this direction is gaining great popularity among scientists, because there are many aspects that require detailed study and analysis, for example, the creation of mathematical models in behavioral economics. Irrational behavior when making managerial decisions at enterprises is more widespread than previously thought before the development of behavioral finance. Leaders and managers of companies should examine themselves, their actions and their decisions, develop rational approaches and get rid of irrational actions. Companies should involve the following specialists in business processes, such as Scrum-masters, People Partners and others who are unbiased and independent experts and consultants, in order to reduce the risk of making irrational decisions. Because the development of the economy and markets is the result of decisions made by people. The results of our research can be used by top managers at enterprises.