Tuesday, December 21, 2010

Risk informed decision making

At NASA's risk management homepage you can navigate to a paper on risk informed decision making. As defined there:
Risk-informed decision making, as described in this paper, is
the formal process of analyzing various decision alternatives with respect to their impact on the PMs, of
assessing uncertainty associated with their degree of impact, and of selecting the optimal decision
alternative using formal decision theory and taking into consideration program constrains, stakeholder
expectations, and the magnitude of uncertainties.

Probably the most useful idea in this paper is that risk-informed is different from risk-based. The former takes risk into consideration; the latter adjusts all values for risk and makes a utility decision.

In effect, although some quantitative models are introduced and suggested, the main idea is that risk informs decision making but there are other factors that may intervene and override. Just common sense, really.

Nevertheless, the paper proposes three big steps that are useful to review:

1. Formulation and Selection of Decision Alternatives: In this step the decision alternatives are generated by quantitative and qualitative analyses, past experience, as well as engineering judgment. Unacceptable alternatives are removed after deliberation

2. Analysis and Ranking of Decision Alternatives -- In this step, the screened alternatives are ranked

3. Actual Decision making -- The final decision can be made only after a deliberation takes place (that is, we are describing a risk-informed rather than risk-based process). Deliberation is necessary because there may be aspects of the particular decision that cannot be considered in a formal way.

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