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Article: Management accounting--decision management: Ian Janes offers his guide to a problem area for P2 candidates: the approaches that managers can take when faced with "risky" decisions.(study notes)
- Article from:
- Financial Management (UK)
- Article date:
- December 1, 2008
- Author:
CopyrightCOPYRIGHT 2008 Chartered Institute of Management Accountants (CIMA). This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Several decision-making techniques are available to a manager facing a range of possible outcomes from a course of action. Generally, the technique chosen will depend largely upon the manager's level of knowledge about the likelihood of their occurrence and also upon the number of areas of uncertainty concerned (a topic that I will address in a future article).
In discussions about decision-making problems, the words "risk" and "uncertainty" are often used interchangeably, but students need to be aware of the key difference between them. "Uncertainty" refers to situations where we cannot predict with statistical confidence whether events will occur or not. ...