The Risk Analysis Decision Making Tool

1010 words - 4 pages

Solving organizational problems effectively requires an appropriate mindset--viewing problems as opportunities or challenges and looking for solutions as opposed to placing blame, as well as developing skills in problem solving--a disciplined approach to dening the problem and identifying and implementing appropriate solutions (Suzanne de Janasz 395). Individuals or groups with undisciplined approaches to problem solving typically derive solutions with no real understanding of the problem. This typically results in solutions that are temporary in nature and end up being costly to the organization. Effective employees, managers and leadership in an organization are those who follow logical, systematic approaches in their quest to solve problems and make decisions in the problem solving process. There are numerous tools that are used in the decision-making process, such as brainstorming, backwards planning, incubation, and risk analysis. This paper will focus on providing an analysis of the decision-making tool called risk analysis and apply it to the world of mobile computer manufacturers.In order to understand the risk analysis technique, we must define the concept of risk. We must also clarify the distinction between the concepts of problem solving and decision-making, two concepts that are frequently confused with one another.Risk can be defined as the potential future harm that may arise from some present action. Problem solving can be defined as the process of identifying and correcting a problem. A problem can be defined as the gap between "what is" and "what should be". According to Kiesow (1994), it is in this stage that we define and identify potential solutions for problems. Decision-making is the process of selecting one solution from alternative solutions that will solve a problem. Thus, decision-making is actually a part of the problem solving process.Risk analysis is a popular decision making tool used in a multitude of diverse activities such as insurance underwriting, investment planning, banking, commodities trading, military strategic planning, engineering, environmental studies, and scientific inquiries. It is a technique used to identify possible risks, assess their likelihood and impact, and facilitates the creation of methods to avoid or reduce these risks. The technique employs risk assessment, risk management, and risk communication into its process.According to Wharton (1992), risk assessment is the articulation of risk in terms of their likelihood and seriousness. Risk assessment involves three fundamental processes. The first is the identification of risks. This produces a list of risk items that can be evaluated. The second is the analysis of the risk or risks. This process assesses the probability of loss and magnitude of each listed risk. The third involves prioritizing the risks in a ranked order. Once the risks have been identified and assessed, risk management techniques and methodologies can be applied to combat...

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