Risk Based Decision Making
“Risk-based decision making (RDBM) is a process that organizes information about the possibility for one or more unwanted outcomes to occur into a broad, orderly structure that helps decision makers make more informed management choices.” More simply stated, RBDM asks the following questions and uses the answers in the decision-making process:
• What can go wrong?
• How likely are the potential problems to occur?
• How severe might the potential problems be?
• Is the risk of potential problems tolerable?
• What can/should be done to lessen the risk?
BUT YOU ALREADY CONSIDER THIS, DON’T YOU? Of course! All of us make hundreds of decisions every day. For almost every decision, there is some chance of an unwanted outcome. We include this possibility in our decisions; sometimes informally (when we change lanes on the interstate) and sometimes formally (when we perform calculations to decide how much insurance to buy). Increasingly, the world is demanding more structured and more defensible decisions (especially where risk is involved). At the same time, systems and operations are becoming more complex, making intuitive risk management decisions more difficult and less reliable.
• What can go wrong?
• How likely are the potential problems to occur?
• How severe might the potential problems be?
• Is the risk of potential problems tolerable?
• What can/should be done to lessen the risk?
BUT YOU ALREADY CONSIDER THIS, DON’T YOU? Of course! All of us make hundreds of decisions every day. For almost every decision, there is some chance of an unwanted outcome. We include this possibility in our decisions; sometimes informally (when we change lanes on the interstate) and sometimes formally (when we perform calculations to decide how much insurance to buy). Increasingly, the world is demanding more structured and more defensible decisions (especially where risk is involved). At the same time, systems and operations are becoming more complex, making intuitive risk management decisions more difficult and less reliable.
Hall Associates can ensure that RBDM adds to your decision-making process as a systematic consideration of diverse risks that may be important to various stakeholders. A wide range of risk analysis tools (from very simple to very sophisticated) is available to help you develop just the right information about risks to support your decision making. The question is not, “Should I use risk-based decision making?” The question is, “How should I use risk-based decision making?” The key is to focus on using the most suitable tool(s) for your situation. But RBDM is really about supplying the right information for your decision-making process.