Demand amplification is a well-known concept in supply chain management that refers to the problems of interpreting the correct demand in a production system with imperfect information and (more significantly) delays.
I found this Beer Game simulator that shows that even with perfect information, a production system with delays is not that easy to manage effectively.
I've seen a similar phenomenon that I'll call "problem amplification". This is when some minor issue happens but by the time it's been handed down a management chain, it transforms into a crisis.
To me, both demand and problem amplification are examples of information corruption due to errors introduced by hand-offs.
I have a distinct memory of many of my grade school teachers reminding our class to use primary sources when doing citations in reports. This is what genchi genbetsu and evidence-based management are all about:
Accurate, reliable information from the best primary sources vs questionable, corrupted information from perhaps well-meaning but fundamentally suboptimal non-primary sources.
The "well-meaning" part is a critical point because it's very important to recognise (as is demonstrated by Beer Game simulations) that people are not engaging in this dysfunctional behaviour because they are bad people. The system as setup with its policies requiring hand-offs, restricted communication channels, over-specialised roles, etc. is designed for failure.