When to do DA?

Fundamentally, the answer to this question is: ALWAYS. However, we are faced every day with a wide range of decision-making situations. Some are very simple, and others are quite complex. They can range from where to go to dinner to a broad range of capital projects and business strategies. To establish the best approach in applying DA, first assess the level of risk and complexity of the situation. The parameters to consider in establishing the level of risk include:

• • Number of uncertainties
  • Degree of knowledge regarding uncertainties
  • Uncertainty inter-dependence
  • Financial exposure and capacity to withstand downside risk

The parameters to consider in establishing the level of complexity include:

• • Number of Stakeholders
  • Extent of Decision Scope
  • Degree of mis-alignment between Stakeholders and Decision Maker
  • Inclusion of external organizations
  • Access to data or subject matter experts
  • Time to make the decision

The matrix shown below provides a list of characteristics of decisions to consider. It can help to categorize the level of uncertainty and complexity in your decision.

Decision Characteristics

Once the levels of uncertainty and complexity are determined, the following chart can be used as a guide in determining the type and amount of decision analysis to use. For example, if the level of uncertainty is high and the level of complexity is low, the recommended application of DA would be Framing + Stochastic Financial Analysis. A project with these characteristics likely has many uncertainties but relatively few possible alternatives to choose from for the recommended solution. From the chart below, you will notice that “Framing” is always recommended. Framing can be very quick and can add huge value to a project or decision. It is always worth the time and effort.

DA deployment guidelines

The matrix shown below provides further details concerning the deployment of DA to the decision based on the level of uncertainty and complexity. The DA Deployment guidelines addresses what resources are needed. A listing of typical decision situtations with those characteristics are shown below the guidelines.

DA deployment details and typical projects