Moral hazard arises because an individual or institution does not take the full consequences and responsibilities of its doings,and therefore has a tendency to act less carefully than it alternately would,leaving another party to hold some responsibility for the consequences of those actions. ◼ Moral hazard arises because an individual or institution does not take the full consequences and responsibilities of its doings, and therefore has a tendency to act less carefully than it alternately would, leaving another party to hold some responsibility for the consequences of those actions