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In: Finance

What is the significance and importance of sound business decision-making in risk and risk management in...

What is the significance and importance of sound business decision-making in risk and risk management in business?

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Expert Solution

Decision making- It is a process of choosing best alternative by evaluating and analyzing the advantages and disadvantages of all the available alternatives.

Risk- It is the uncertainty of occurrence of any event.

Risk management- It studies the strategies of managing and mitigating the risk.

Significance and importance of sound business decision-making in risk and risk management in business- Decision making is a crucial part of a business. Key people of companies have to take many decisions regarding, budget, funding, investment, operations, recruitment and selection of a project. All decision require thorough and in-depth analysis.

Decision making goes through these steps:

  1. Identification of problem.
  2. Identification of alternatives.
  3. Analysis and evaluation of alternatives.
  4. Choosing the best alternative.
  5. Taking action and implementation.
  6. Follow up and Review.

A sound decision making reduces the risk of failure of the project or investment alternative. When decision is taken by taking into consideration the above steps, it is always a good decision that reduces risk for business. Business is able to manage its risk in several areas with the help of proper planning and decision making.


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