RISK AND UNCERTAINTY MANAGEMENT

Light and dark, joy and pain, yin and yang…everything good in this world must come with an opposite, and your business is no exception. Every worthwhile opportunity comes with risk. As a decision maker, you must make the tough choices that drive your projects forward in the face of this risk and uncertainty. Decision Strategies, a strategy consulting firm, can apply our measured, strategic approach to help you combat uncertainty to find its opposite: clarity.

Suppose you are a marketing manager working on a market entry strategy for a new product. A previous survey indicated a 70 percent probability of achieving your desired market share, but a more recent survey indicates only a 55 percent probability. Should you proceed with the market entry strategy? Call it off? Conduct a third survey?

Or suppose your company is deciding whether to make a significant investment in a promising new technology. If successful, the advantage gained from the technology could keep your company years ahead of the competition; however, the probability of success for the technology is low. When faced with forks in the road such as these, how will you know which way to proceed?

Generally, many companies choose to make “single-point estimates” – also known as “best guesses” – to forecast production, sales, costs, and earnings, as well as to plan budgets. Other companies play “what if” with endless scenarios. Still others arbitrarily use a higher hurdle rate on riskier investments. These methods handle risk and uncertainty inadequately or ignore it completely. They provide a false sense of security when making judgments about complex decisions.