Risk-based decision-making

Summary

David Hilson, the 'risk doctor,' challenges the concept of 'risk-based decision making,' arguing that all true decisions inherently involve risk. He defines risk simply as 'uncertainty that matters' and explains that decisions are only necessary when there is uncertainty about which option to choose, and when the outcome matters. Since every decision involves uncertainty and has potential consequences, Hilson suggests that all decision-making is, by nature, risk-based. He proposes that instead of using the term 'risk-based decision making,' we should simply recognize all decisions as inherently involving risk and focus on managing that risk effectively.

Takeaways

• 😀 Risk is defined as uncertainty that matters—uncertainty alone isn't a risk unless it impacts objectives.
• 😀 All risks are uncertain, and they matter because they can affect objectives, either positively or negatively.
• 😀 Decisions inherently involve uncertainty and alternatives—if there is no uncertainty, it's not a real decision.
• 😀 True decisions only arise when the outcome matters—decisions with no significant impact don't require thought or deliberation.
• 😀 If there is a clear, fixed requirement (e.g., regulatory compliance), there is no decision to be made, as the action is mandatory.
• 😀 All important decisions involve uncertainty, and the outcome matters, which makes them inherently risky.
• 😀 Every real decision involves assessing the risks associated with different alternatives and choosing the best possible option.
• 😀 The decision-making process involves defining objectives, evaluating risks, and selecting the option that minimizes risk while achieving goals.
• 😀 There is no need to specify 'risk-based decision-making' because all true decision-making is inherently risk-based.
• 😀 A good decision-making process should involve assessing uncertainties, choosing the best option, implementing the decision, and monitoring outcomes.
• 😀 The ultimate goal of decision-making is to minimize risks and maximize the chances of achieving desired objectives.

Q & A

What is the definition of risk according to David Hilson?

David Hilson defines risk as 'uncertainty that matters'. This means that risk involves uncertainty, and it matters because if it occurs, it could affect our objectives either positively or negatively.

Why does David Hilson suggest that the term 'risk-based decision making' may not make sense?

Hilson suggests that 'risk-based decision making' might be redundant because all important decisions inherently involve uncertainty and have consequences that matter, making them risk-based by nature.

What are the two essential characteristics of decisions as described in the video?

The two essential characteristics of decisions are: (1) Decisions involve options or alternatives, and (2) Decisions are necessary when there is uncertainty about which option is best or preferable.

What does David Hilson mean by 'a no-brainer' decision?

A 'no-brainer' decision is one where there is no real uncertainty, and the best choice is obvious, requiring little to no thought or decision-making process.

Why does Hilson emphasize that decisions are only needed when the outcome matters?

Hilson argues that decisions are required when the outcome is significant enough to affect objectives. If the outcome doesn’t matter, there’s no real need to make a decision, as the choice is trivial.

How does the uncertainty in decision-making relate to risk?

Uncertainty in decision-making is a key element of risk. If there is uncertainty about the outcomes of different options, that uncertainty can have an impact on the objectives, making the decision inherently risky.

What does Hilson suggest as the best approach to decision-making?

Hilson suggests that decision-making should involve clearly defining decision objectives, considering the risks associated with each alternative, choosing the option that minimizes risk while maximizing the chances of success, and monitoring the outcome to ensure objectives are achieved.

What is the implication of all decisions being inherently risky, according to Hilson?

The implication is that since all true decisions involve uncertainty and matter in terms of their outcomes, decision-making must inherently account for risk. Thus, the idea of 'risk-based decision-making' is redundant as every decision is already risk-based.

What role does monitoring play in the decision-making process?

Monitoring plays a crucial role in tracking the outcomes of decisions. It ensures that the chosen option is achieving the desired objectives, and if things aren’t working as expected, corrective actions can be taken.

Why does Hilson claim that the phrase 'risk-based decision-making' should potentially be dropped?

Hilson claims the phrase 'risk-based decision-making' is unnecessary because all decisions, by nature, involve risk. Since every true decision involves uncertainty and outcomes that matter, referring to decision-making as 'risk-based' is redundant.