28 Jan 2.7 Ensure decision making occurs in accordance with risk management plans
“You cannot dance an arabesque in “Swan Lake” and “Nutcracker” the same way – Natalia Makarova
Ensure decision making occurs in accordance with risk management plans for all options, and within appropriate timeframes.
Corporate governance requires that risk management be integral to policy, planning and operational management. Applying risk management processes will help strategic decision makers make informed decisions about of policy decisions and service delivery options. Decision makers need to be satisfied that the risks and opportunities related to proposals are fully considered. It is important that all those involved in the decision making process have consciously analyzed the proposal.
The principles of risk management relating to decision making are the same as for any other risk management process.
How do you Assess Risks Related to a Decision?
- Identify – Any risks associated with the decision and the implementation of the decision
- Assess – The impact of the risk and likelihood of its occurrence
- Prioritize – Include any significant risks in the report
- Manage – Produce a SMART Action Plan to minimize the impact/reduce the likelihood of each of the significant risks identified (Treat, Transfer, Terminate or Defer the Risk – It’s unlikely that you will be able to tolerate it as you’ve already identified it as significant).
- Review – Analyze the risks with statutory officers and amend the risk assessment accordingly
- Agree risk assessment with decision maker. Clarifying any risks in risk assessment in order to allow the decision to be made
- Update any relevant risk register following the decision.
What is the purpose of the risk assessment?
The risk assessment:
- Demonstrate that all significant risks related to the decision have been considered.
- Provides evidence that the decision maker has been provided with sufficient information about risks in terms of probability and impact
- Explain how the risks will be managed
What will the risk assessment record?
The risk assessment should record:
- Risks that may arise if the decision is not taken.
- Risks that may arise if the decision is taken.
- Actions that will be taken to manage each risk documented if the decision is taken.
Time Pressure as a barrier to decision making
Time pressure forces decision makers to shift from logical processes (ideal) to intuitive processes (sub-ideal). Time pressure can distort how we consider and choose between alternatives. Severe time constraints can make decision processes and individual judgment less objective and more influenced by intuition as more formal and rigorous approaches are ignored. All decisions are time-bound in the sense that we do not have an infinite amount of time to make a selection. Still, firm and proximate deadlines and limited resources are common causes of time pressure. Information overload is another. While considering all relevant factors is important to build support for the decision, data collection can eat up time better spent analyzing alternatives and making the decision itself.
Decision makers who believe they have ample time to make a decision tend to arrive at more logically crafted decisions than those who feel as though they have an insufficient amount of time. While time pressure is generally perceived as being a barrier to effective decision making, it may also have the exact opposite effect. A limited time frame can focus mental energy and effort to bring the appropriate resources to bear on a decision more quickly and efficiently than otherwise might have been the case.
There are some effective approaches to dealing with time pressure.
- Clearly defining the decision and its parameters early on can reduce ambiguity and make it easier to hone in on relevant data.
- Setting clear boundaries on matters such as who will participate and how long discussions will continue can similarly manage the amount of time given to a decision.
- In many instances, the use of heuristics can be applied to complex decisions to serve as shortcuts in conducting analysisand weighing alternatives.
Heuristic is a “shortcut” method of problem solving that makes assumptions based on past experiences. Examples include going by “rule of thumb,” when you apply your experience of something having happened a certain way enough times that it’s likely to continue happening that way. It is not guaranteed to be accurate every single time, but it cuts out processing time by avoiding detailed analysis of every particular situation.