Risk Management Decisions - Assignment Example

risk management decision making al Affiliation) Risk management decisions The management process involves provision of mechanism to make decisions with risk reduction as the major impact factor. The decision making process in management is considered cognitive process which results to selection of a possibility among several options. Risk management provided making decisions in the consideration of proactively identifying the risks, prioritizing the risks, implementing strategies to deal with the risks and assurance and measure of the effectiveness of implementing the strategies. The decisions made due to risks depends on the type of risk one wants to invest in. risk management decision making is done with much consideration that persons are rational and they consider rationality in making choices. Commercial and business risks are measured using different methods. A group starts from a value and asses specific methods (Kropp, 2007). Through this the issues in risk become controversial. the choices available in risk management decision making depends on the social, business, safety technical and environmental factors. The process is done from the decision needed, proposed options, appropriate assessment, validation, review and acceptance, approval to proceed and monitor and improved performance. The issue of seeing things done differently is key needed in the bringing of the management of risk today.it allows for the understanding the common features of decision making.it also involves examining the diverse models which are employed for technical assessment of risk to bring about a common approach in management of the outputs. Opportunity leveraging is a risk management decision. It involves forwarding thinking that aspires to maximize opportunities that comes their way (Kropp, 2007). Risk management decision making are important due to complexity in the modern systems. Risk management include enterprise risk, process risk and project risk. It does not much consider the risk that is involved. The decision on the risk involves steps. In the decision making the organization first explore the scenarios. Performance is analyzed with the results against what they actually are. The future occurrences are imagined to examine the situation it is able to present to the organization and also the opportunities it opens up. This is done such that when the situation comes, the organization initiates faster response (Kropp, 2007). Opportunity mindset is developed in the process. The stakeholders consider the encouragement of team members to act positively to the program. Tangible evidence on the success of the implementation can be shared with the stakeholders. Discussions in the organization are essential in developing the positive mindset. In opportunity leveraging, identification and quantifying opportunities is vital. The organization should be clear on the returns that they expect to make on the investment. Balance of opportunities is much needed in the identification with consideration of availability of tools and processes put in place to properly qualify and quantify the opportunities. The problems that occur are small deviations from the standards of performance which require identification and description (Kropp, 2007) Scenario planning is a key risk management decision. The main aim of scenario planning is to create a detailed set of strategies which is able to work across variety of future operation settings. Scenario planning is done following a given process. Definition of the environment in which the risk is to taken is the vital. The environment in which one is operating should be understood with the characteristics being analyzed in details to predict the future occurrences. It enables one to know the elements that the organization is able to influence. It also enables understand and develop alternative operation environment. Description of the effects become the second step. When the effects are described, it assures the managing the organization future uncertainties. Description of the effects is recommended since the scenarios do not have a stand value. Evaluation of threats and opportunities forms a step in scenario planning as a risk management decision. The evaluation of the responses are done considering the benefits, the costs and the impact of the views on the different stakeholders. The cost ineffective risk responses are discarded. The impact of the threats and opportunities is for the evaluation of the outcomes of the program set. It also helps in understanding the limits of the risks and opportunities on the future to cater for the scenario. Determining the cause of action is the last step in scenario planning. The set strategies are tested to evaluate their effectiveness and also the behavior of other stakeholders and competitors about the plan. The information collected will be used to judge the strategy elements. Strategy synthesis is the most important of all in the process. It entails identification of the high potential strategies with their implementations being considered. The recommended cause of action will involve the application of the expected utility axioms to be well formed representation of the thought (Kropp, 2007). Empowering of people, teams and partners is a key risk management decision. Effective management of risk is determined with the people that will be involved in the work to make the decision. This allows them to explore opportunities to mitigate risk. The first step in the empowerment is engagement of the people. The engagement enables the people to be committed to the objectives with the focus on making the project effective. This allows efficient operation of the projects and programs. Engagement of staff in planning and implementation of programs improves production. The empowerment can be developed through effective communication and proper training and development of the teams and also individuals. Motivation of assertive behaviors and characters is essential in empowerment. Individuals will recognize their ability and this leads to operation with a high degree of freedom. The decision making should be shared since it shapes the effectiveness of risk management. It has become difficult to implement since it is intangible. Knowing of one’s partner is essential in empowerment of the people. Partnering internally or with the suppliers to a business is a component of a program. Success comes when the different teams with different technical capabilities make good use of the available resources. Partnership should be natured with deliberate activity. Partnership should encourage the link between the successful management of the risk and the rewarding level appointment. The last step in empowering of teams and individuals is the management of relationships. Contract negations should not suppress the flexibility needed for successful delivery. There should be specification of the risk monitoring arrangements and the structures of decision making. This makes actions to be taken proportionately. Timeline analysis is a risk management decision. Environment program recognize that time is critical and sensitive in decisions. Timely analysis in decision making have two major components. First order mapping of risk analysis is critical. Priorities on the probabilities and impacts of a risk are in the bearing of program outcomes. The analysis puts risk as acceptable and no action is required. The risk can also be critical and requiring immediate action. The risk can also have a high impact and action be planned. Analyzing the risk also goes for second order mapping. Factors are dynamic and change over time with the program also being dynamic. There is need to know the starting of the risk with the immediate impacts and plan on what to do about the risk when it comes (Kropp, 2007). The third step in timeline analysis is matching the tempo of the responses. The available causes of action are many and only the correct adequate one should be taken. The response capability to the risk environment is analyzed. It brings the clarity as to who is charged with making decisions and the actions to be taken. Essentially the decision making should be in place such that the monitoring also becomes dynamic. Generally risk management decision making establishing of objectives, classification of the objectives, alternatives, the consequences and the cause of actions open to the problems identified. Direct cost in decision making. Direct cost in risk decision making involves the decisions on those risks that can be controlled. Direct costs do not have to be located to a department or product. Direct costs leads to performance of risk assessment and this results to decisions which are of higher quality. When unexpected aspects are added to the direct cost, the risk can be reduced further. The unexpected aspects mainly comes about as a result of the environmental factors from which the organization operates. The costs can be identified particularly with a specified project that had been put up. The costs that are incurred for circumstances are considered direct costs. Facilities supplied with consistent treatment also make them treated as direct costs. Direct cost permit businesses and organization to manage volatile, complex and the uncertain environments in a business. The direct costs in decision making leads to enjoyment of improved compliance with regulations. Assurance in a business and more satisfaction of consumers also comes from direct costs (Kropp, 2007) Direct cost in decision making considers participation in the decision making by more than one person. It ensures the completeness in the decision making increasing member commitment to the final outcome of the decision made. Direct cost in a business leads to financial stability of the business since the costs are closely monitored. The costs allows for the creation of a synopsis by the management on the final outcome. The sharing of individual’s opinion in the decision making improves the effectiveness and efficiency in the team and the decisions made (Kropp, 2007). The sharing of ideas also enable the participants eventually achieve organization goals and objectives. Every organization analyses the acceptance of new inventions and technologies. Direct costs also benefits the business through flexibility. The cost allows for the adjustments of decisions earlier made Direct cost in decision making can be estimated through several means including satisfaction in jobs, commitment in the organization, perceived support in the organization, organizational citizenship behavior, organizational profits, the performance of jobs and organizational performance and labor management relations. Indirect cost in management decision making. Indirect cost in risk management decision making involves those decisions that cannot be directly be controlled but affects the outcomes of the decisions or choices made materially. The costs are incurred by a business with no regard to the business model. The indirect cost are usually related to the decision environment.it represents risk constraints that can include consequences. The cost also comes up with unexpected aspects which are ignored as not being factors which mostly leads to decision making which is not adequate. Indirect cost benefits an organization in several ways. It makes the desires of part of the management for inclusion of more participation genuine and have the have the real powers which are needed to affect the outcome of the process. Indirect cost just like in direct costs benefits a business through maintenance of the stability of a business. Indirect cost also ensures that there is no money wastage in the operations of a business. Indirect costs include supplies to the organization, membership and salaries of administration providing normal support to the operation of an office or organization. Indirect costs benefits an organization through enabling the future predictions hence decisions are made considering the prediction (Kropp, 2007). The cost have the benefit to social pressure and conform to group dominations since there is no control of an idea over the others. The time needed for indirect cost decision making is not wasted as compared to direct cost decision making. The idea does not come from several people and do not involve opinions and arguments. Indirect cost are involved in environmental decision making at many levels and attained in different ways (Kropp, 2007). The approach enables autocratic leadership in the financial sector it allows the decisions made on one’s own imputes. Indirect costs are estimated through different criteria. Indirect costs are estimated through rate for administrative cost though the finance department. The indirect cost can be used for all overhead and general and the administrative cost. This is done by calculation of the ratio of overhead cost of all the projects. Indirect cost on decision making is considered analytical since they have been reversed for decisions that do not bring about the mathematical optimization method. Decision is rarely used in in the decision making. References Kropp, J. (2007). Advanced methods for decision making and risk management in sustainability science. New York: Nova Science. 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