Kiss Approach To Risk Based Decision Making
Sep 2nd, 2009
Who doesn’t have to make decisions? Private decisions? Job related/business decisions?
No matter your age, position, job, we all have to make decisions almost on a day to day basis.
Decisions alternatives, even the straight forward ones, often have hidden/secondary effects, and most of the time are made more difficult by our perception, sentimental values etc.
Large corporations sometimes use highly sophisticated procedures to support their decisions on capital expenditure, investments, processes, and yet, oftentimes, they realize afterwards that the best option was not selected.
Not to dig the dagger in the wound or work on the obvious, but if the world went into the global economic recession and crisis we have endured, it was precisely because decision making was based on improper parameters.
The reason for these problems afflicting decision making is that upside and downside risks (upside= winning aspects, downside=failure aspects) are not properly accounted for each alternative, and alternatives are not properly compared among each other.
What you will find in the linked KISS (Keep it Simple, Stupid) Presentation is a summarized version of an introductory course on decision making. The considered technique is applicable to any type of decision and is a subset of the CDA/ESM methodology. In order to make it really simple, we had to simplify some areas to the bone (hence the recurring remarks about a mathematician most likely fainting when reading our explanations). More sophisticated and rigorous methods do exist (CDA/ESM), especially if you want to compare in detail long term alternatives and produce/evaluate their financial results. We have books, blogs, courses and web site talking about them, but the purpose here was to really bring a somewhat impervious subject to the point it make sense for everyone to use it on a day to day basis, with a minimum of remote supervision/coaching.
Welcome to the world of transparent, justifiable, decision making!
Tagged with: acceptable, career, coaching, compliant, crises, decision, Financial, hollistic, institutions, investment, making, NPV, risk, software, success, tolerability, training, wealth
Category: Consequences, Crisis management, Hazard, Mitigations, Probabilities, Risk analysis, Risk management, Tolerance/Acceptability