This is the fourth in a five part series on decision making.
Risk is one of those words that is hard to quantify yet we all have an instinctive feel for the need to manage risk. The focus of the leadership team should be only on the elements of the business that have an impact on business value at a risk level you can live with. Your business may decide that in order to really increase the business value of the company, you’ll need to shorten the amount of time it takes to bring a product to market by ninety days. Your design team has found a way to integrate an extreme program management technique and you’ll be able to shorten the gestation period for new products by three months with very little risk. This is obviously a ‘no brainer’ and an initiative you would implement right away.
On the other side of the risk scale is the substitution of your three major suppliers. In your building value analysis, you’ve discovered you can increase your business value significantly by switching to low cost suppliers. Your operations team is very uncomfortable with this move because of the lack of track record with the new suppliers and the potential to actually increase the product development lifecycle times even though you were initially lowering costs. In this case, you may decide the risk is not worth the potential positive return.