Elaborate the concept of "Decision making under Risk" from Managerial perspective

Decision making under risk is a fundamental concept in managerial decision making. It refers to situations where managers have to make decisions with uncertain outcomes. Here's a step-by-step elaboration of the concept:

1. Understanding the Concept: Decision making under risk occurs when a manager has to make a decision where the outcomes are not certain. However, the manager has enough information to assign probabilities to the different

Decision making under risk is a fundamental concept in managerial decision making. It refers to situations where managers have to make decisions in conditions of uncertainty, but they have some knowledge about the probability of occurrence of each possible outcome.

Step 1: Identify the Decision The first step in decision making under risk is to identify the decision that needs to be made. This could be anything from deciding on a new product launch, choosing a new market to enter, or deciding on a new strategic direction for the company.

Step 2: Gather Information Once the decision has been identified, the next step is to gather information. This could involve conducting market research, consulting with experts, or analyzing internal data. The goal is to gather as much relevant information as possible to inform the decision.

Step 3: Identify Alternatives After gathering information, the next step is to identify the possible alternatives. These are the different options that are available for making the decision.

Step 4: Weigh the Evidence Once the alternatives have been identified, the next step is to weigh the evidence. This involves assessing the risks and benefits associated with each alternative. Managers often use tools like decision trees or risk analysis to help with this process.

Step 5: Choose Among Alternatives After weighing the evidence, the next step is to choose among the alternatives. This involves selecting the alternative that has the highest expected value, which is calculated by multiplying the value of each possible outcome by its probability of occurrence and then summing these values.

Step 6: Take Action Once a decision has been made, the final step is to take action. This involves implementing the chosen alternative and monitoring its results to ensure that it is achieving the desired outcomes.

Step 7: Review Decision & Consequences After the decision has been implemented, it's important to review the decision and its consequences. This can help managers learn from their decisions and improve their decision-making processes in the future.

In conclusion, decision making under risk involves a systematic process of identifying decisions, gathering information, identifying alternatives, weighing the evidence, choosing among alternatives, taking action, and reviewing the decision and its consequences.