The way a problem presents itself affects the way it is solved.

We all believe we can make good decisions if given all the facts. By facts, we mean the data that allows us to evaluate probabilities and make choices based on the evidence. But we don't always notice how information is presented, which can dramatically affect our choices and decisions! Even expert reactions vary widely to the same empirical evidence depending on how the information is shared. Let's look at an example.

Case Study

Imagine a scenario where doctors must decide whether to employ a new surgical procedure on their patients.

• Half of the doctors are told the patients will have a 90% survival rate if they undergo the procedure. 
  
  
• The other half of the doctors are told that patients will have a 10% mortality rate if they undergo the procedure.

The statistics are the same—90% of patients will survive, and 10% will not. It makes sense that both groups of doctors would make the same decision. However, the doctors who are told that their patients will have a 90% survival rate are much more likely to employ a new procedure than the other set of doctors. Why is that?

Social scientists explain that even medical experts are prone to making different decisions based on whether the options are framed as gains or losses. Focusing on the gains (survival rate) causes a higher percentage of doctors to choose the procedure while focusing on losses (mortality rate) leads to lower usage rates.

The above case study illustrates how different data framing affects doctors' decision-making. And these people have years of experience—even experts are not immune! It's safe to assume that we will all be influenced by how information is shared. 

Understanding this can help you be more aware of how framing may shape your interpretation of data and ultimately lead to better decision-making. 

How To Overcome the Framing Effect During Decision-Making

Focus on the data! Take the time to analyze all of the relevant facts thoroughly. Our brains are prone to making snap decisions based on how information is presented. 

Get a second opinion. Be aware that even experts are prone to the effects of bias. Having more than one set of eyes review a potential plan will minimize the chance of a biased decision.

Don't rush the decision. Snap decisions are more likely to be affected by bias than a more thoughtful decision made with careful consideration.

Ai and Decision Making

When it comes to managing FX risk, overcoming the framing effect can be especially difficult. FX volatility is unpredictable. And changing interest rates, inflation, and geopolitical events will continue to roil currency markets.

Between our own biases and the unpredictability of currency markets, businesses have been at the whim of FX volatility. Which is why Pangea built their flagship product, Pangea Prime. Pangea’s platform combines Ai and world-class technology to help your business manage FX risk at the speed of markets, 24/7, saving you time, money, and resources. The Ai ingests millions of data points to calculate the best strategy, giving you predictability on your P&L.

With Pangea Prime, companies can leverage technology and Ai to overcome the framing effect and make unbiased decisions about their FX risk.

Schedule a demo today and get the predictability and control you deserve in your business.

Pangea Prime: Predictable, simplified FX management.

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