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Non-technical skills for managing risk and performance in financial trading

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  • Meghan Leaver
  • Tom W. Reader

Abstract

Recent large-scale failures in financial institutions have been found to be caused, in-part, by human factors-related issues in financial trading. In other environments where risk management and performance are intertwined, a human factors approach is often adopted to understand how the ‘non-technical skills (NTS)’ (leadership (LD), decision-making (DM), situation awareness (SA), teamwork) of organisational actors influence outcomes. Yet, to date, there has been minimal application of human factors research in financial trading. This study (i) identifies ‘real-world’ (i.e. non-laboratory) research studies investigating the NTS important for performance in financial trading, (ii) examines and synthesises data on the NTS found to underpin good or poor performance and (iii) considers the quality and coverage of research investigating NTS in financial trading, and identifies potential areas for future research. Nineteen studies were identified through a systematic literature search and then content-analysed for associations between NTS and performance in financial trading. The review found a range of decision-making (e.g. heuristics and biases, intuitive DM, emotional regulation) and LD skills (e.g. setting standards, monitoring behaviour, encouraging speaking-up) to have been identified as important for managing risk and performance in financial trading environments. Furthermore, SA (e.g. information search and assessment strategies, vigilance, identifying ‘noise’ data) and teamwork (e.g. avoiding ‘role’ conflict, communication between traders) were found to be important, yet remain less explored within the literature, and should be the focus of future research. NTS appear essential for effective risk management within the financial sector, yet further field research is required to examine the context-relevant behaviours that underpin safe activity. This will facilitate the development of evidence-based systems for assessing and training NTS competencies.

Suggested Citation

  • Meghan Leaver & Tom W. Reader, 2016. "Non-technical skills for managing risk and performance in financial trading," Journal of Risk Research, Taylor & Francis Journals, vol. 19(6), pages 687-721, June.
    • Handle: RePEc:taf:jriskr:v:19:y:2016:i:6:p:687-721
    DOI: 10.1080/13669877.2014.1003319
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    References listed on IDEAS

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    1. Ashby, Simon & Palermo, Tommaso & Power, Michael, 2012. "Risk culture in financial organisations: an interim report," LSE Research Online Documents on Economics 47488, London School of Economics and Political Science, LSE Library.
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    Cited by:

    1. Cormac Bryce & Thorsten Chmura & Rob Webb & Joel Stiebale & Carly Cheevers, 2019. "Internally Reporting Risk in Financial Services: An Empirical Analysis," Journal of Business Ethics, Springer, vol. 156(2), pages 493-512, May.

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