Risk Management Decisions
Once risks have been identified and evaluated,
a choice must be made as to how each risk will
be addressed. This phase of the risk management
process is primarily a problem in decision
making Numerous strategies have been suggested;
some have proven to be more productive than others.
Utility Theory and Risk Management Decisions
Some writers propose that utility theory be
used as an approach to risk management decisions.
Utility theory was invented by economists to
explain why people make the choices they do. It
is not intended to be normative--to define what
decisions people should make.
Decision Theory and Risk Management Decisions
The most appropriate approaches to risk management
decisions are drawn from decision theory and
operations research. The types of problems
addressed by decision theory are those for
which there is not an obvious solution, the
situation that characterizes many risk management
decisions. The decision theory approach aims at
identifying the best decision or solution to