Fundamentals of Management Assignment no.

Summary of “Managerial Decision making under Risk and Uncertainty”:

The document describes that how managers make decisions under risky and uncertain
situations. According to it managers’ decisions under risky and uncertain situations don’t depend on
the rules, regulations or techniques defined for decision making. These decisions depend on what the
managers think is right to do in that situation not on the predefined decision making techniques,
moreover, no one has so far studied managers´ risk attitudes in parallel with their actual behavior
when handling risky prospects, thus information about their behavior is still unknown.
A risky situation is an uncertain situation in which the decision maker is not sure that what
will be the outcome of a decision and is uncertain about what choice to be made.
According to the studies some of the managers believe that if you want higher return you
must take risks more frequently as in order to earn high profits decision makers have to take high
level risks but some of the managers think that taking risks and return are negatively related to each
other.
When managers were asked what they did when faced with a problem that involved risk, and
they had to make an alternative they said would avoid taking risks, collect more information ,check
different aspects of the problem, actively work on the problem to reduce the risk, delay the decision
or delegate the decision. While the most preferred alternate was to avoid taking risk and least
preferred was delegate the decision.
According to studies all the managers think that risks they face are not inherent to the
situations and thus risks are manageable and controllable by using skills. This can be done by
Very
collecting more information, Good
checking effort!
different aspects of the problem, and actively working on the
problem to reduce the risk.
Managers can be categorized into categories according to their decisions made in risky and
uncertain situations which are “Risk Prone” and “Risk Averse”. Both categories are desirable in
different situations. According to the managers “Risk Prone” managers are those who want to make
progress and are not afraid of making mistakes while “Risk Averse” managers are those who want to
be safe rather than being sorry.
Managers also told that do they take help or use from the computerized decision making
softwares or tools while they use Excel and other computerized spread sheets or tools for calculating
the estimations and costs before making decisions and if computerized decision making tools or
systems are used it would be a great value to them making decisions.
Managers were asked that who should be making decisions of an organization they had
different views about it. Several of them said that the decision making process should be both
centralized and decentralized while some of them were of the view that it should be centralized,
others said it should be decentralized.
According to the study managers said they took risks in different situations because they
weren’t totally aware about how to handle the situation that they were facing and this lack of
information about the situation and lack of skills to handle it made them make risky decisions in
which they were not sure that what would be the outcome of these decisions.
Thus from the study it is concluded that managers or decision makers don’t follow the
managerial rules while making decisions in risky and uncertain situations but they make decisions on
the bases of their gut feelings. It is also concluded that using computerized decision making tools can
make decision making easy for managers and can help them a lot.

Name: Abdul Wahab Section: B Roll.no: 12f-8213