essential decision making steps
Classify visible phenomena by severity using decision attributes.
|Know the risk taken applying a risk based approach.||Generate decision options considering data, risk and expected results.||Opt for the best option considering previous experience and risk policy.|
|Preserve the organization’s corporate memory and demonstrate knowledge during decision making.|
Different decision criteria/attributes will vary in importance to the decision making process. Applying a risk based approach will help decision makers make informed decisions and be satisfied that the organization’s risk policy and opportunities related to decisions are fully considered. Rational decision makers should analyze the risk weight of each criteria and calculate the global weighted risk in order to have an exact idea of the risk exposure.
Decision Making & Risk assessment
The principles of risk assessment relating to decision making are the same as for any other risk management process and will serve to demonstrate that all significant risks related to the decision have been considered, provide evidence that the decision maker has been provided with sufficient information about risks in terms of probability and impact and explain how the risks will be managed.
In addition to the decision maker obtaining a level of assurance that decisions have been subject to a robust risk assessment, it is an important principle of good governance that they can be subjected to effective scrutiny (Accountability). Decision makers can be held accountable for decisions by auditors and local regulators. They will want to see that the decision and the information used to make the decision are documented and accessible, i.e. the decision is ’informed’ and ‘transparent’.
interpret multiple information sources
Different decision criteria/attributes will be presented in different values. E.g. in the New Customer decision making, we may have attributes like: Age expressed in number of years, Nationality expressed in country initials, Assets expressed in numbers and currency etc.. that should be processed using a common raring.
Every decision attribute value should be converted to a risk value from 0 to 4 or as defined by the organization’s risk policy allowing the decision maker to better interpret heterogeneous information and apply a unified processing format accessible to all persons involved.
In the Contoso example, a list of suspicious transactions raised by the transaction monitoring system is sent daily to the Compliance desk. Although for many decision attributes the initial value may be expressed in dollars, points, or whatever scoring system makes sense, it is converted to a risk scale as this is defined by the organization’s risk policy. Both, the risk rating and the weight of each decision attribute (criteria) will contribute to the calculation of the global weighted risk an important risk exposure indicator.
|Decision Attribute||Initial Value||Risk Rate|