Overview
An enterprise risk framework that doesnt impact corporate decision making is useless. There are various considerations to keep in mind when integrating risk into strategic decision making.
- All forecasted benefits need to be appropriately risk adjusted. That is, executives should not necessarily follow the course with the highest expected return.
- Complex risk models can short circuit decision processes. That is, the phenomenom of decision paralysis indicates that decision makers can be overwhelmed by statistics and models in a way that prevents them from making any decision. The solution is to try to simplify the analysis as much as possible, and to utilize a risk framework that executives are comfortable with.