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Decision Analysis – Risk Evaluation and Decision (Part 3)

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Step-4 Evaluate Risks

·         Goal: Assess on "what could go wrong" with high-score alternatives in the future.

Substep-1: Recognize Risks

·         Goal: To identify potential Risk related with each of the Alternatives.

·         Output: List of risk that could be happened with the Alternatives.

·         Ask the following question:

o   What is the potential RISK if this Alternative is selected?

o   What is the DOWNSIDE (consequences) if RISK is happened?

·         Get risk List from:

o   Consult with Subject Matter Expert.

o   Opinion of experience personnel or people with pessimistic viewpoint.

·         State Risk in the following sentences: If the (RISK) become true, then the (DOWNSIDE) is...........

Substep-2: Evaluate Risks

·         Goal: to have a measurement of Risk.

·         Output: Have score of High, Medium and Low for Impact and Probability of each risk.

·         Note: Use Risk measurement of: High, Medium, and Low.

·         Evaluate each RISK based on these 2 factors:

o   Probability. How likely this will happen.

§  High (H): Expected will happen in a future.

§  Medium (M):  Has been happened in the past, expected to appear again in a future.

§  Low (L): Never happened in the past, and will have a low chance to appear again or will only happen in a rare occasion.

o   Impact. What is the consequence if it happened?

§  High (H): Expect a corporate-wide organizational and financial impact, which affecting all aspect of organization.

§  Medium (M):  Will only affect a certain number of division, department, or specific group of personnel.

§  Low (L): Limited to single or specific individual.

Step-5 Make Decision

·         Goal: Acquire best alternative.

·         Output: A selected Alternative, with best fulfilled criteria and has an acceptable risk.

·         Ask

o   Which alternative has unacceptable risk?

o   Are there any ways to mitigate risk?

o   Is the return of the alternative worth taking the risk?

Conclusion

·         This process, back then provide us to better think through the real objectives and what need to be done to get into that objectives.

·         Under time pressure, decision can be made by considering a few key objectives and obvious risk.

·         As for the background story before – we’re able to decide clearly what need to be done back then – and decide the things that we don’t considered before (because we thought it was too obvious and then it was opt-out from the alternatives) – IMHO really helpful, and I believe my colleagues think the same way.

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