What Role Does “Groupthink” Play in the Decision-Making of Institutional Investment Committees during a Crisis?

Groupthink can play a significant and often detrimental role in the decision-making of institutional investment committees during a crisis. It is a psychological phenomenon where the desire for harmony or conformity in a group results in an irrational or dysfunctional decision-making outcome.

In a crisis, the pressure to conform to the consensus view can be immense, leading committee members to suppress dissenting opinions and ignore warning signs. This can result in a failure to challenge the prevailing narrative, a collective overestimation of the group's abilities, and a shared reluctance to consider alternative courses of action.

The result can be a delayed or inadequate response to a rapidly deteriorating market situation.