Decision Making

How Do You Know You’re Making the Right Decision?

Every day, we make decisions without knowing exactly what will happen next. Some are small. Others can change the direction of a business, career or life: Should I expand? Should I invest? Should I hire? Should I adopt this technology? Should I enter this market? Should I do it now, wait or walk away?

To do or not to to, that has always been the question.

There is rarely a perfect answer waiting for us. We make decisions with the information available at the time, our own experience and judgement, what other people tell us, what the data appears to show, and sometimes simply what our gut is telling us. The difficulty is knowing whether we have considered enough before taking the next step.

This is where Decision Making and Risk Management naturally (hopefully) meet.

Risk Management cannot tell us with certainty that a decision is right. Neither can a decision matrix, a consultant, a spreadsheet or A.I. What structured decision-making* can do is help us examine a choice more carefully: What am I trying to achieve? What could affect the outcome? What am I assuming? What could I gain? What could I lose? What might I have overlooked?

 

* yes noted the in-my-opionion passe word 'structured' is being used here 

The purpose of this section is therefore very practical: to help us make better-informed decisions when we cannot know the future.

How Does Decision Making Relate to the Pillars of Risk Management?

Decision making sits very naturally within the established Pillars of Risk Management, particularly Risk Assessment, Enterprise Risk Management and the Risk Register.

A Risk Assessment helps us identify what could affect an objective, consider likelihood and consequences, examine existing controls and decide whether additional action is required. A risk register helps us organise and monitor those risks. Enterprise Risk Management takes a wider view, helping an organisation consider uncertainty in relation to its objectives and strategy.

But decisions do not always arrive labelled “Risk Management.”

A business owner may simply ask, “Should I open another outlet?” A manager may wonder, “Should we replace this system?” An entrepreneur may ask, “Is this opportunity worth taking?”

Behind these questions are risks, opportunities, assumptions, dependencies, consequences and choices.

This is why Decision Making has its own section on this website. We want to make structured risk thinking* useful even to someone who has never completed a risk register or studied Risk Management.

A Better Decision Is Not the Same as a Perfect Outcome

There is an important distinction.

A good decision can sometimes produce a bad outcome. A poor decision can occasionally produce a good outcome simply because we were lucky. I am a strong believer in luck! 

Imagine carefully assessing a new business opportunity, checking the finances, testing customer demand and examining different scenarios... only for an unexpected external event to change everything six months later (or worse next month!). That does not necessarily mean the original decision was bad.

Likewise, taking an enormous risk without examining it and succeeding does not necessarily mean the decision-making process was good.

That is why decision quality matters.

Instead of judging every decision only by what eventually happened, we can also ask whether we used a sensible process based on what we knew at the time.

Making Decisions When We Don't Know Everything

One of the hardest parts of decision making is accepting that we will rarely have all the information we want.

We can research more. Ask more people. Run another analysis. Consult LLM for another opinion. Build another spreadsheet.

Eventually, however, we still have to decide.

This creates questions such as: How much information is enough? When does careful research become analysis paralysis? When should I trust data? When should I listen to experience or instinct? And what would make me change my mind?

Decision intelligence gives us many ways of approaching these problems. Some methods are simple and familiar; others come from statistics, economics, psychology and behavioural science. These include expected value, decision trees, mental models, Bayesian thinking, pre-mortems, second-order thinking and fast-versus-slow thinking.

You do not need to use every tool for every decision.

The skill is learning which tool helps you think more clearly about the particular decision in front of you.

Looking Beyond “What Could Go Wrong?”

Risk Management is sometimes associated only with negative outcomes. But a decision cannot be properly considered by looking only at what could go wrong.

There is also reward and opportunity.

If I do this, what could I gain? What happens if things go better than expected? What opportunity might I lose by doing nothing? Is waiting actually safer, or does waiting create a different risk?

This is where risk versus reward, cost-benefit analysis and scenario planning become useful. They allow us to compare possibilities rather than automatically choosing the option that appears safest.

Sometimes the right decision for us may involve taking more risk (not less) because the potential opportunity justifies it. Or is it just our gut feeling overwriting the risk data being presented?

What We Will Explore in Decision Making

Rather than trying to solve every decision on this page, we have divided Decision Making into seven areas.

Uncertainty explores how we make choices when information is incomplete and the outcome cannot be known in advance.

Risk vs Reward looks at what we may gain, what we may lose and whether the potential opportunity is worth the exposure.

Scenario Planning helps us consider different ways the future could unfold rather than depending upon a single prediction.

Decision Matrix provides a structured way to compare options using factors that matter to the decision.

Cognitive Bias & Blind Spots introduces the ways our own thinking can influence what we notice, believe and choose. The deeper study of individual biases belongs under Human Behaviour, so we will not duplicate that discussion here.

Cost-Benefit Analysis looks at the costs, benefits and trade-offs associated with different choices.

Better Business Decisions brings these ideas into practical situations—expansion, investment, technology, people, suppliers and other decisions businesses face every day.

These seven areas are not intended to tell you what to decide. They are there to help you look at the decision more clearly before you decide.

You Still Make the Decision

This is perhaps the most important part of this entire section.

A framework does not make the decision for you.

Neither does a risk register.

Neither does A.I.

Two people can look at exactly the same information and legitimately reach different conclusions because their objectives, circumstances, resources and willingness to accept risk are different.

Structured decision making gives us another advantage: it makes our thinking more visible. We can see the assumptions we are making, examine alternatives, challenge ourselves and decide what information would cause us to reconsider.

We still cannot guarantee the outcome.

But we can know that we looked before we leapt.

Questions We Will Be Exploring

Throughout Decision Making, we will explore practical questions people ask when they are trying to decide what to do next#:

• How Do I Know I'm Making the Right Decision?

• What Risks Should I Consider Before Making a Big Decision?

• How Do I Make a Decision When I Don't Have All the Information?

• How Do You Make Decisions Under Uncertainty?

• Risk vs Reward: Is It Worth It?

• Should I Do It, Wait or Walk Away?

• What Am I Missing Before I Decide?

• How Do I Challenge My Own Assumptions?

• What Is a Decision Matrix?

• How Do I Compare Two Difficult Choices?

• What Is Scenario Planning?

• Best Case, Worst Case and Most Likely Case

• What Is a Pre-Mortem?

• What Is Reversible vs Irreversible Decision Making?

• How Much Information Is Enough to Make a Decision?

• When Should I Trust Data?

• When Should I Trust My Gut?

• What Is Analysis Paralysis?

• How Do I Know When to Stop Researching and Decide?

• What Would Make Me Change My Decision?

• Should I Expand My Business?

• Should I Adopt This New Technology?

• How Do I Make a Go/No-Go Decision?

Decision making is not about knowing the future. It is about looking at what we know today from enough different angles to decide whether we are ready to take the next step.

 

#documenting the questions being asked LLM at time of writing today