IRM ERM M1.U4.6 Risk based decision making

Question 1

6 Steps of the decision-making process

Answer 1

Peter Druker, the influential thinker on management, noted in a Harvard Business Review (1967) article, Effective decision making ,that the decision-making process has a sequence of six steps:

Classify the problem – is it new, unique or exceptional, or is it generic
Define the problem – what is the situation
Specify the answer to the problem – what are the boundaries
Decide what is right, rather than what is acceptable, in order to meet the boundaries
Build the decision into the action to carry it out – what is the action and who needs to know
Test the validity and effectiveness of the decision – how was the decision implemented and is appropriate

Question 2

Type of decision maker

Answer 2

The study undertaken at the heart of this article, grouped employees into three groups, on a scale from 1) ‘Unquestioning empiricists’ – who trust analysis over judgement, to 2) ‘Visceral decision makers’ – who follow the instincts exclusively. The third group are ‘informed sceptics,’ who effectively balance judgement and analysis.

However, the survey found that only 38% of employees and 50% of senior managers fell into the third group of ‘informed sceptics’, meaning that not all decisions are being made effectively.

Question 3

Decision-making style

Answer 3

1) task or socially focused, and

2) high or low tolerance for ambiguity (open to interpretation).

Analytical

Conceptual

Directive

Behavioural