Decision risk
Decision risk is the possibility that a choice will have consequences other than expected, especially in the presence of incomplete data and uncertainty.
Definition
Decision risk is not a reason not to decide. It is an element of every major decision. They can be reduced by collecting data, defining scenarios, assessing probabilities, setting a loss threshold and preparing a response plan. The goal is not to eliminate risk, but to make it aware.
Key ideas
- Uncertainty of consequences
- Probability assessment
- Response plan
Practice and life
Before making a decision, write down: the best-case scenario, the worst-case scenario, the cost of not making a decision, and the point at which you will change course.
Common misconceptions
It is a mistake to confuse caution with avoiding decisions. It is also a mistake to take risks without naming their scale.
> There is no risk-free decision.
> — Guru Element
Questions for self-reflection
- What risk am I really taking?
- What will I lose if I don't decide?
- What is my plan if the outcome is different than expected?