Ethical Aspects in the field of Gamification and Finance
“When used well, gamification can be a powerful tool for engagement, literacy and driving positive outcomes.” CFA Institute, 2022
Gamification is a trend that is not only occurring in the financial sector but is also gaining popularity through many educational and professional offerings. While educational offerings have already recognized the trend at various levels and companies also like to use games for training, this is still quite new in the financial sector. Gamification itself, and especially in relation to the financial world, can raise some ethical questions.
Pros and Precautions with simulations according to CFA Institute (2022) and Nespolo (2024) in the context of Finance:
Pros
- The more complex theoretical issues are, the higher the hurdle to learning them can be. Playful learning elements can mitigate these hurdles through a practical and playful aspect. This way, knowledge transfer does not feel like traditional frontal teaching, and learners experience moments of success and fun, which can meaningfully support learning.
- Through simulations and playful scenarios, users can not only gain theoretical knowledge but also develop practical skills that are essential for understanding and navigating the real financial market as well as soft skills. Thus, gamification in the financial sector offers high potential to bridge gaps and make complex content easier to convey.
- Many gamification applications provide users with learning successes and thus motivation in complex theoretical aspects. This reinforces their application in the financial sector.
- Simulations allow you to make mistakes in a safe space without consequences, or to try out things that cannot be tested in the real environment.
Precautions
- From an ethical perspective, it can always be critically examined whether financial instruments should be associated with something playful. The ethical conflict arises from various viewpoints in that the capital or lives of others can be affected by financial decisions. In general, several other points must be critically considered. Gamification in the context of financial education should primarily be implemented for educational purposes.
- Games entail a certain addictive potential through the fun experienced by users, which can lead employees to engage with the applications even after working hours, thereby blurring the lines between work and leisure.
- The transmission between fiction and reality must be maintained, and topics with serious real-world relevance should not be made too playful.
Within the framework of general ethical principles, it should also be noted that games with a financial background should not fundamentally avoid ethical conflicts. All aspects and mechanics in the games also exist in reality and occur daily. Therefore, completely avoiding ethical conflict situations in simulations would not be a sensible solution. A better approach is to create awareness for ethically responsible and conscientious behavior. Thus, games can also design consequences for the actions of players, making them more realistic and promoting awareness of actions and consequences.
Ethical Aspects in the Portfolio Management Simulation
With the Portfolio Management Simulation, users can experience the portfolio management context in a protected environment. It intends to allow players experience return possibilities but also the risk when constructing and supervising an investment portfolio.
Some examples of ethical considerations:
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The Portfolio Management Simulation creates a dynamic environment where participants can apply their portfolio management skills in a protected setting. The simulation should present ethical dilemmas that allow for a range of responses and solutions, enabling participants to see the consequences of their decisions. Here is an example:
- Context: Participants are managing a portfolio for a client with a moderate risk tolerance. They have agreed to a specific strategic asset allocation.
- Ethical Dilemma: Participants must decide on the tactical asset allocation and which financial instruments to include in the portfolio. The ethical challenge is to ensure the investment aligns with the client’s risk tolerance and adheres to the agreed boundaries. However, participants might be tempted to deviate from the agreed strategy in pursuit of higher returns.
- Realistic Consequences: In the simulation, participants face repercussions from their clients if they do not adhere to the agreed strategy and the market turns against them. This could result in a loss of client trust, which influences the client satisfaction in the simulation.
- Learning Objective: Participants should learn the importance of adhering to client agreements and making decisions that align with the client’s risk tolerance and investment goals.
This approach helps participants internalize ethical behavior by experiencing the direct impact of their decisions on portfolio performance and client satisfaction.
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Can you blindly trust the predictions (economic outlook) for the prediction of financial markets? This question is crucial for understanding the limitations and uncertainties inherent in economic forecasting – also in the Portfolio Management Simulation:
- Context: The economic outlook in the simulation serves as the starting point for analyzing the economic situation and thus the development of the financial markets for the upcoming period.
- Ethical Dilemma: Should the economic outlook in the simulation be highly accurate, or should it reflect the inherent uncertainties of real-world predictions? Participants must decide whether to rely heavily on these forecasts or to approach them with caution, understanding that economic predictions can be both accurate and inaccurate.
- Realistic Consequences: Sometimes the economic outlook proves to be correct, leading to successful investment decisions. Other times, it may be incorrect, resulting in unexpected market reactions and potential losses.
- Learning Objectives: Participants should learn to analyze macroeconomic factors critically while maintaining a healthy skepticism about economic predictions. They should understand that financial markets can react unpredictably, even with thorough analysis.
Instructors should conduct debriefing sessions to inform students that the simulation’s economic outlook is slightly more accurate in predicting market conditions than in reality, emphasizing the importance of not becoming overconfident in such forecasts.
From an ethical perspective, it is important to recognize that games in the field of finance should not shy away from presenting ethical conflicts. Instead, they should aim to create awareness of ethically justifiable and conscientious actions (Nespolo, 2024). By integrating ethical considerations into a portfolio management simulation, educators can provide a comprehensive learning experience that prepares participants for the ethical challenges they may face in real-world investment management. This approach not only enhances the educational value of the simulation but also fosters a deeper understanding of the importance of ethics in financial decision-making.