Managerial Decision Making Under Risk and Uncertainty

The case study is about those managers which take decisions at certain moments according to the
situations. The study depicts that a few people are there in the world which take the decisions
based on calculations. Now most of the people take decisions by following well known and pre-
defined paths. The decision-making and risk taking is always a great challenge for the managers.
There are different type of managers who define the risk in their own ways. Some say that risk
means different ways used for different decisions, some say that risk is a meaningless word,
excessively used by managers. Some of the people think that risks are manageable and they have
directly effect on return hence both are correlated.
This study was carried out in two major Swedish forest companies, it includes the interviews of
twelve managers. There are many types of risks defined by managers such as fire risks, financial
risks, technical risks, commercial risks and investment risks. Managers are mostly uncertain
whether they may get the goals in a specific time. One type of risk is that it is difficult for the
managers to predict when to leave the existing market. The risk is that if you leave a market you
can’t again enter into that again, that’s why some of the managers make the decisions based on
“Guts feelings”.
Now about Risks and Returns, are they related? Sometimes when we take the larger risks we
expect larger returns. Higher risks often result in higher returns. Most of the people agree with
the statement that risks and risks and returns are correlated.
How to be dealt with the risks? Some managers think that risks can be refrained by avoiding
them, by collecting more information/inspection of problems, by delaying the decisions and by
delegating the decisions. As per as managing the risk is concerned most of the people said that
risks can be managed.
Risk prone and Risk averse people: Risk prone people and Risk averse people can be
distinguished in a simple way that risk-prone people are those who want to make progress and go
forward, they are not afraid of making mistakes while risk-averse people often avoid to practice
new things, they are those who rather be safe than sorry and they are afraid of mistakes. In other
sense risk-prone behavior is something positive and risk-averse behavior is something negative.
None of the managers have ever used the computer-based decision tools. However, sometimes
they use Excel when they have to estimate financial risks.
One main problem that has been identified is lack of information of problems which managers
usually face. Mostly managers claimed that they didn’t have necessary skills to estimate different
types of risks and hence they mostly made the decisions based on intuitions and gut feelings.
Conclusively, managers handle many risky situations due to lack of information. Using computer
based decisions is more valuable than making decisions by taking risks. To take the computer
based tools they have to define better techniques and methods.