If risk management is about decision making, are current risk management solutions irrelevant?

Now that the updated COSO and ISO risk management standards emphasize a connection to enterprise objectives and decision making, does this mean ERM and GRC solutions focused on risk registers and regulatory compliance are missing the true value of risk management?

Will current risk management solutions evolve to integrate more decision support functionality or will standalone prescriptive analytics and other technology solutions take a more prominent role in enabling risk-informed decision-making processes?

I have analyzed the range of service, software, and information product vendor resources that I believe will be relevant to integrating risk management and business decisions, and invite GlobalRisk Community members to review a complimentary copy of this report as noted in the blog post "A New Perspective on Vendor Resources for Risk-Informed Decision Making."

What are your opinions on how current vendor offerings may change or what new players will emerge to help embed risk management into decision-making processes?

Replies

Carlito Carlos Edwin A. Gierran March 27, 2018 4:10
John Farrell said:
Another view comes from Daniel Kahneman's categorization of System 1 and System 2 decision making in "Thinking. Fast and Slow." He suggests System 1 thinking, used to address many of our everyday decisions, is fast and emotional. This aligns with your view of qualitative decision making. On the other hand, there are more weighty decisions in which we use a more calculating System 2 thinking process. These are important decisions which incorporate quantitative assessments.

My belief/hope is that System 2 thinking, which enacts risk management principles, increasingly embeds in more business decisions supported by the increased adoption of machine learning AI-driven solutions. This could improve decision making in two important ways:

Apply some quantitative thought and analytics to what may normally be considered decisions using System 1 thinking.

Reduce the time requirements for System 2 thinking processes.

There are many reasons why people avoid using a quantitative or System 2 approach, but some of the emerging technologies can take away concerns about the possible slower speed or complexity of quantitative, risk-aware decision-making processes.

Carlito Carlos Edwin A. Gierran said:

Decision making is qualitative analysis while risk management solutions are quantitative. In decision making process it should be a combination of qualitative and quantitative analysis.
If risk management is about decision making, are current risk management solutions irrelevant?

Now that the updated COSO and ISO risk management standards emphasize a connection to enterprise objectives and decision making, does this mean ERM a…
Carlito Carlos Edwin A. Gierran March 27, 2018 4:10
John Farrell said:
Another view comes from Daniel Kahneman's categorization of System 1 and System 2 decision making in "Thinking. Fast and Slow." He suggests System 1 thinking, used to address many of our everyday decisions, is fast and emotional. This aligns with your view of qualitative decision making. On the other hand, there are more weighty decisions in which we use a more calculating System 2 thinking process. These are important decisions which incorporate quantitative assessments.

My belief/hope is that System 2 thinking, which enacts risk management principles, increasingly embeds in more business decisions supported by the increased adoption of machine learning AI-driven solutions. This could improve decision making in two important ways:

Apply some quantitative thought and analytics to what may normally be considered decisions using System 1 thinking.

Reduce the time requirements for System 2 thinking processes.

There are many reasons why people avoid using a quantitative or System 2 approach, but some of the emerging technologies can take away concerns about the possible slower speed or complexity of quantitative, risk-aware decision-making processes.

Carlito Carlos Edwin A. Gierran said:

Decision making is qualitative analysis while risk management solutions are quantitative. In decision making process it should be a combination of qualitative and quantitative analysis.
If risk management is about decision making, are current risk management solutions irrelevant?

Now that the updated COSO and ISO risk management standards emphasize a connection to enterprise objectives and decision making, does this mean ERM a…
Carlito Carlos Edwin A. Gierran March 16, 2018 3:45

Decision making is qualitative analysis while risk management solutions are quantitative. In decision making process it should be a combination of qualitative and quantitative analysis.

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