Unethical Conduct Under Uncertainty: A Fear-Based Perspective

Rising uncertainty in the business environment has coincided with a significant increase in unethical behaviors within organizations, posing substantial financial and reputational risks. Unethical conduct is estimated to cost organizations around the world more than USD 4.5 trillion per year, impacting corporate financial stability, investor confidence, and market integrity. Traditional risk assessment and predictive models, which rely on historical data, often fail to account for behavioral responses to uncertainty, creating blind spots in financial risk management and economic forecasting. This paper advances the literature by applying experimental methodologies to investigate the underlying emotional, fear-based mechanisms (namely short-term focus and self-concern) impacting decision-making under uncertainty. By utilizing two distinct types of experimental studies (comprising three studies in total), we empirically examine how uncertainty influences the types of unethical behaviors that are prevalent in today’s organizations. Our findings contribute to the fields of financial risk management and behavioral economics by offering evidence-based insights into the psychological drivers of unethical decision-making. We conclude with managerial implications, outlining proactive strategies to mitigate the financial and operational risks associated with individuals’ responses to uncertainty.