Sarang BhandCo-Owner, Director| Organic Recycling Systems Private LimitedNavi Mumbai, Maharashtra, India
Expected Monetary Value (EMV) tools like decision tree, enable managers to quantify the value of their choices for rational decision making. However, the efficacy of decisions based on this technique depends upon real assessment of probabilities on chance nodes. What is the correct method for assessing these probabilities, so that these assumptions are close to predicted outcome resulting in right decisions. Saving Changes...
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Sudarshan HarshePM III MBA Operations PRINCE2® SIX SIGMA| Fidel SoftechPune, Maharashtra, India
In my opinion, risk assessment is more of expert judgement then of calculus. You calculations may turn invalid more quickly than an expert’s judgement. Calculations are to support observations, it can’t be a standalone process.
As we know, there are number of factors, that results situation in favorable and unfavorable condition. Your success is entirely dependent on your expertise, or skill to have an SME/’s to forecast.
Most of time people underestimate behaviors, negativities. Rate them less, take things for granted. This gives a very different picture when you add values in EMV calculations, if otherwise they are taken more seriously.
So, for me the correct method is expert’s judgment!
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I agree with you Sudarshan. No substitute to human judgement specially at the scene of the incident . Imagine the pilot who has to take a split second judgement for an emergency in his aircraft. He cant wait for probability calculations. Saving Changes...
It depends. For example, oil and gas industries are hazard prone. However, over time, data has been compiled to indicate how often a particular risk has occurred. It is to be noted such incidents has occurred in one part of the world, whereas we can use this data to be used in a project located in another part of the world and this data need to be customized to suit the particular project.
Herein comes the expertise and also bias. At the same time, there can be situations where certain project is happening for the first time and there is no historical data, then one has to rely on the range and of probabilities and assess to what extent financially a particular risk/opportunity can be mitigated/maximized.
Finally, it is decision making which is challenging given the uncertainty/ambiguity and this is one the reasons to go by iterative/adaptive mode of program/project execution Saving Changes...
