Enterprise Risk Management aims to address risks that might affect the enterprise at large. The process steps involve risk identification, assessment and prioritization as well as the development of risk responses. Continue reading Blending ERM and Scenario Planning
In the context of growing a business, but also for just running it, decision making and dealing with risk are core ingredients. In support of both dimensions more or less separate disciplines have emerged (Decision Analysis and Risk Management), each with its own Continue reading DA and RM: Join Forces?
Since I left my former employer Shell in 2015 I have become exposed to opportunity evaluation practices elsewhere in business. I found that everywhere the same discussion Continue reading Risk and discount rate: an unhappy marriage
The best approach for taking into account risks when economically evaluating investment opportunities is the application of probabilistic valuation. This is a more disciplined methodology than just ‘running some sensitivities’. Continue reading Understanding project risk using DeltaLogN
The default number of scenarios that are typically presented by various organizations using scenario planning is four. This stems from the application of the so called deductive Continue reading BP, Shell and Statoil scenario practices
The attraction of a decision tree is that it brings together conceptual thinking about a decision problem and the quantitative evaluation of it. For the latter purpose it may be inferior to other methodologies, for example Monte Carlo simulation or analytical Continue reading An innovation for decision tree probabilities
I am a big fan of look backs and after action reviews. Only in that way can we learn, reflect on how we looked at opportunities, what we were thinking at the time and whether the decisions taken made sense in the context of what we knew or could know. The objective is Continue reading The Shell scenarios of the 90s and what came of it
However interesting and generally appealing scenario thinking, as discussed in my previous article, may be, it only provides a broad, qualitative picture of the context within which one is considering a significant investment decision. But indeed, a very important Continue reading Scenarios, numbers and the lognormal
When developing a strategy or making investment decisions, there will be many uncertainties that need assessment. These can range from cost and timing issues to broader questions at the macro level, for example political, regulatory or social developments. A way to get to grips with the latter category is by using ‘scenario analysis’, sometimes called ‘scenario thinking’ or ‘scenario planning’.
Continue reading Scenario planning and the so what question
For the development or continuity of a business lots of investment decisions are required. Making the right choices is key for the future success of the organization. Good templates for decision making processes exist that will allow arriving at such a choice in an orderly and structured manner. Although decisions can even be challenging in the context of limited uncertainty, for example because of delicate trade-offs between attributes of alternatives, the dimension that I would like to focus on in this article is uncertainty.
Continue reading Uncertainty and the art of decision making