Decision Making Process - Risk / Certainty / Uncertainty Decisions

Explain how risk, certainty, and uncertainty influence the decisions that managers make.

Ans:

Certainty, risk, and uncertainty represent the three decision environments within which managerial decision making and problem solving take place. Certain environments offer sufficient information about possible action alternatives and their outcomes. While this environment is ideal for decision making, very few managerial decisions actually occur in certain environments. Risk environments lack complete information about action alternatives and their consequences, but offer some estimates of probabilities associated with the potential outcomes of possible action alternatives. Uncertain environments occur when information is so poor that managers are unable even to assign probabilities to the likely outcomes of known alternatives. Risk environments and uncertain environments represent the vast majority of decision-making and problem-solving situations encountered by managers.

Source: Management, 11th Edition - John R. Schermerhorn