About This Chapter
Strategic Decision Making & Risk Management - Chapter Summary
Work through this chapter at your own pace to explore the relationship between risk management and strategic decision making in business. Our short and expertly taught lessons lay out several methods of risk management, analysis and control, as well as the practical functions of bounded rationality, probability charts and the Monte Carlo simulation. You can access this chapter whenever you need to brush up on these concepts, and you can review the material on any Internet-connected device. Be sure to take the accompanying lesson quizzes and chapter exams to check your understanding of the information. When you're finished with the chapter, you should be able to:
- Describe the ways in which managers make decisions based on certainty, uncertainty and risk
- Recognize the applications of risk management and risk analysis in business
- Differentiate between risk management and risk control
- Outline the process of risk assessment
- Evaluate the use of the bounded rationality model in decision making
- Reduce risk by using probability charts
- Discuss the uses of the Monte Carlo simulation in risk management
- Explain how the need for risk management is driven by external environmental changes
1. Decision Making for Managers: Certainty, Risk & Uncertainty
Making decisions with the most amount of certainty is something managers learn to do over time. In this lesson, we will review how managers work with certainty and risk in order to make informed decisions.
2. Risk Analysis & Risk Management in Business: Overview, Objectives & Comparison
A successful business requires careful attention to the allocation of resources and, just as important, to the degree to which those resources are exposed to risk. In this lesson, we'll discuss the importance of risk analysis and management in business.
3. Risk Control vs. Risk Management
In this lesson, we'll clarify the difference between risk management and risk control. We'll also describe a five step process commonly used in risk management, and then highlight four basic categories of risk controls.
4. What Is a Risk Assessment? - Process, Methods & Examples
What is a risk assessment, and why would we prepare one? In this lesson, we'll learn what it is, why it's needed, and how to prepare a risk assessment and rank potential risks for our business.
5. Bounded Rationality and Decision Making in Organizations
Managers have to make either intuitive or rational decisions every day. However, the rational decision-making process is not always an option. The bounded rationality model was developed to explain making rational choices under time constraints and other pressures.
6. Using Probability Charts for Risk Reduction
All strategic decisions have risks associated with them, but not all risks are equal. This lesson outlines ways that decision-makers can systematically characterize risks in order to focus the right resources on the right risks.
7. Using the Monte Carlo Simulation in Risk Management
In this lesson, students will learn how the Monte Carlo simulation enables testing of preliminary task estimates to help reduce project uncertainty and risk.
8. External Environmental Changes Drive the Need for Risk Management
Businesses operate in a dynamic world where the only thing for certain is that things will change. Change can bring both risk and reward. In this lesson, you'll learn how change in the business environment drives the need for risk management.
Earning College Credit
Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.
To learn more, visit our Earning Credit Page
Transferring credit to the school of your choice
Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.
Other chapters within the Business 316: Strategic Decision Making course
- Introduction to Strategic Decision Making
- Strategic Thinking in Making Business Decisions
- Decision Making Models for Business
- Statistical Tools for Decision Making
- Quantitative Tools for Decision Making
- Financial Data for Strategic Decision Making
- Technological Support for Strategic Decision Making
- Group Dynamics in Strategic Decision Making
- Strategic Decision Making for Managers
- Decision Making in International Businesses
- Analyzing Business Decisions
- Communication in Strategic Decision Making