In some of the upstream companies interviewed the

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Unformatted text preview: ked into a system that’s inadequate and they’re loath to change it to anything else. And that’s crazy.” (B) In other companies, the reasons for the failure to update the techniques they use or to modify how they use decision analysis, are endemic within the organisation. This section aims first to identify these reasons and, second, to understand their sources. This will allow the author to explain why there is a gap between decision analysis theory and its use in practice. In Section 2.2 of Chapter 2 decision analysis was defined to be a normative discipline within decision theory consisting of various techniques and concepts that provide a comprehensive way to evaluate and compare the degree of risk and uncertainty associated with investment choices. In addition, in this section of Chapter 2 literature was highlighted that indicated that the definition of risk and uncertainty that the 141 decision-maker adopts affects the method that they use to cope with the risk and uncertainty (Lipshitz and Strauss, 1997; Butler, 1991; Grandori, 1984; Thompson, 1967). In some of the upstream companies interviewed, the organisation had no corporate definition of risk and uncertainty. For example: “I don’t know what you’ve found in other companies, but I would say that there’s about as many different definitions of risk and uncertainty in our company, as you found in your literature search.” (G); “Yes every time we start to discuss risk we have arguments and rows.” (D); “Different people have their own definitions and their own way they would like to look at it. So if I go in speak to someone about their definitions of risk it depends on what asset team they are in. Trying to get consistency of approach is difficult. Even if you speak to people with the same job title within the asset they’ve got different definitions.” (N2); and, “But I do say that when you talk about risk, I think there’s quarters here where you would hear folk say it’s fundamental to do a risk assessment. But normally it’s a risk assessment of health, safety and environmental. Are we going to kill anybody? Are we going to damage the ecosystem? Are we going to pollute the environment? Different types of risk. Again it’s a misconception. When I saw the risk analysis manual here, I was in seventh heaven, but it was upsetting the breeding patterns of fish or something ... Within any company, within any department, within any team, there’s different definitions.” (C) In most of these companies, only very basic decision analysis techniques were used (company N is the exception. In this company, the respondents described how it is widely recognised that there are multiple definitions of risk and uncertainty within their organisation. When employees communicate about risk and uncertainty they are explicit about their definitions and perceptions of the terms). In other companies where explicit corporate definitions of risk and uncertainty have been introduced, the organisation typically used more decision analysis techniques and had a more formalised investment appraisal process. Clearly then, organisations use of decision analysis is affected by the corporate perception of risk and uncertainty which, in turn, is a product of the decision-makers’ beliefs. The sources of decision-maker’s beliefs wi...
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This document was uploaded on 03/30/2014.

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