This paper introduces two kinds of risks present in any economic organization: the risk of cognitive time distortion and the risk of economic distortion. These two kinds of risks are related in a complex and non-linear manner, so that the cognitive distortion risk gives rise to the economic distortion risk. By monitoring the cognitive distortion risk, managers may also control the economic distortion risk. Basic conceptual foundations for the conception of these two kinds of risks, originating in unconditional human cognitive time distortion, are elaborated in this paper.

“.. if economic organization is formidably complex, which it is, and if economic agents are subject to very real cognitive limits, which they are, then failures of alignment will occur routinely.” – O.E. Williamson, 1991: 79