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5 Information Sources for Risk-Aware Decision Making

As stated in our article on not all risks are created equally, the relationship between decision-making and risk has been top of mind for me recently.

When it comes to decision-making, one of the biggest enablers (but only when it is done well) is information. According to the book Decision Quality: Value Creation from Better Business Decisions, relevant and reliable information is one of six components of an effective decision.

As any experienced executive will tell you, there’s no understating the importance of information. In fact, when terms like “currency,” “power,” or “key to success” are used to describe it, the value of said information is clearly demonstrated for making sound judgements.

There are several sources of information decision-makers can turn to. The following graphic lists each of these sources, but continue reading for a brief description of each.

List of information sources for decision makers

 

1.  Risk – this source is any risk(s) to achieving the strategic or business objective related to the decision. This can include not only impact and likelihood, but also level(s) of risk the company is willing to take.

2. Context – this is the 360o degree view, or the ‘environment’ surrounding the organization and the specifics of the decision. This is NOT to be confused with context of risk identification, which is something you can learn more about here. Tools like a PESTEL or SWOT analysis can be harnessed to better understand this internal and external environment.

3. Resources – this type of information helps deciders understand the resources (people, money, and tools) needed for executing a decision and whether they will be available at the time they’re needed. And to be clear, it’s not just people, as in capacity, but people with the requisite subject matter expertise and skills needed to effectively execute on the decision.

4. Competition – depending on the decision, any ‘competition’ will be another critical source of information. How are competitors pricing their product/service offerings? What is their market share? How do they generally run their business? If this sounds like a competitive analysis, then you’d be correct. This is a separate instance where the “OT” of a SWOT analysis or other type of competitive analysis really comes in handy.

5.  Assumptions – this type of information consists of conditions you believe will be in place or otherwise true regarding the decision. Since it’s in the future, it’s not fact, but instead a best guess. Let’s say there are 3 projects that are supposed to go live before this decision kicks in. Since it’s in the future, there is the assumption that resources will be available because these previous projects are now live.

Although information for decision-making comes from a variety of sources, one common thread between all of them is that it must be, as Norman Marks explains here, relevant, reliable, complete, current, timely, and easy to find and use.

When and only when it meets all 5 of these conditions does information become an enabler of good decision-making.

But Carol, wait. It looks like risk is just one of several sources instead of THE source – is this correct?

Yes, risk is just one piece of the decision-making puzzle.

Again, like Norman, myself, and others often repeat, the job of risk management has really morphed into (or at least should) into decision-support, or a similar title. There are intense debates as to whether it should even continue to be referred to as risk management.

It’s clear that company leaders will not find actionable information from a huge list of risks, or as Norman puts it, “absent the context of what we [the company] is trying to achieve.”

Therefore, the job of risk management professionals must adapt or evolve beyond the risk-list based ERM that many of us have been accustomed to for years.

Instead, risk management is just a slice of what could be referred to as decision support.

Risk shouldn’t be providing all this information. After all, leaders need a variety of perspectives in order to avoid tunnel vision and other biases and make the best decision possible.

Of course, there will be information about risk that will come from the risk area. But there may also be risk-related information that comes from other business areas within the company. And that is okay.

When it comes to, say, competition, someone in strategy is much better suited to handle that competitive analysis.

The job of the risk manager then is to be that person that coordinates, collects, and presents information to decision-makers in an easily digestible way, translating it into something useful, regardless of its source.

English Quaker writer and minister William Pollard has perhaps the best statement for illustrating the importance of this when he said:

“Information is a source of learning. But unless it is organized, processed, and available to the right people in a format for decision-making, it is a burden, not a benefit.”

Think of it like a silo – we’ve long said that risks should not be confined to a particular department. In the same vein, risk managers should not confine themselves to their own little silo.

Shifting this thinking to a more ‘decision support’ role will go a long way toward un-mucking the common perception that risk management is about compliance and preventing failure instead of enabling sound decisions in pursuit of organizational success.

Are there other sources of information for decision-making you would add to this list?

Please join the conversation on LinkedIn and share your thoughts on this important subject with me and your colleagues.

If your company is struggling to understand how information from disparate sources should be brought together to inform decision-making, please reach out to discuss your specific situation and different options for moving forward.

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Meet Carol Williams, SDS Founder & Lead Strategist

To our readers:

This blog was launched to provide strategy and risk practitioners with a go-to resource to better guide their efforts within their companies. Thank you for bringing me and my team along to be part of your journey towards better risk management, strategic planning and execution, and overall decision-making. Happy reading!

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