Промышленный лизинг Промышленный лизинг  Методички 

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professional staffand dubbed a cowboy by their peers. Clearly, this is a topic of critical importance to professional services firms, as well as a skill that is difficult to perfect.

Risk Management and Quality Assurance Defined

Risk management is the process of identifying the various undesirable outcomes for the firm, estimating their cost and likelihood, and determining an approach for mitigating or eliminating the risks. It is focused on the full suite of potential problems that a firm may encounter, regardless of whether the firm controls them and regardless of their probability.

Quality assurance is a related, but different, discipline. Quality assurance is focused on ensuring, through process, policy, and training, the proper delivery of the end service to the client. It also addresses, secondarily, firm components related to delivery such as internal staff execution and sales. Because quality is delivery-oriented, and, therefore, easy to scope, estimate, and understand, it is usually better defined within a professional services firm and is embedded throughout the firms delivery process. Professional services firms without a reasonable quality assurance program are generally rapidly extinguished by the market, after creating a trail of bad work and unhappy clients. In fact, it is firms of this type that create the bad reputation that can, unfortunately, affect the reputation of firms of good standing. Failure to adhere to a reasonable set of quality controls is bad for the firm, the staff, clients, and the industry.

Risk Management: A Balancing Act

Risk management is challenging because it requires judgment in the face of uncertainty. A simplified model of risk management (see Exhibit 14.1) shows the effect of too little or too much risk in a professional services firm.

Too little risk results in the cessation of all economic activity. In the world of complete risk elimination, contracts and projects become too cumbersome, and decision making and client pursuits take too long. Too much risk can be equally debilitating; the firm is in constant firefighting mode and is torn apart by bad reputation and even litigation that ensues post poorly sold and executed work. Each firm must find the appropriate balance of risk and return, which will vary from decision to decision and project to project. This balancing act is challenging, and the decisions made ultimately depend on a host of variables.

Because each firm situation and each individual decision is unique, it is useful to develop the general skills needed to effectively balance risk and



Not enough risk Too much risk

Limited new business

Dissatisfied clients

Complicated contracts

Over-promised projects

Slow delivery

Bad agreements

Over-engineered services

Lawsuits

No growth

Staff turnover

Good decision-making processes balance risk and return.

Decision-making process revisions are based on analysis of the process and not the outcomes.

Exhibit 14.1 The Role of Good Decision Making in Risk Management

return in each case. The principle skill needed is high-quality decision making.

The Critical Role of Decision Making in Risk Management

Good risk management ultimately depends on good decision making. Good decision making, in turn, is based on the rapid acquisition of the proper amount and kind of data, building a framework for deciding, moving forward, and incorporating feedback from past decisions as the feedback becomes available.

The field of decision science has been well researched, particularly in the past two decades, and a considerable amount of information on how to improve organizational decisions is available in the related academic and popular literature. The University of Chicago and the Wharton School at the University of Pennsylvania in particular have strong decision science specialties.

Some of our recommended books and papers on the subject are referred to throughout the chapter, as well as in the resources section at the end of the chapter. One in particular is Winning Decisions, by J. Edward Russo and Paul J. H. Schoemaker.




In Winning Decisions, Russo and Schoemaker outline the fundamentals to a good decision-making process:

Framing: Framing determines the viewpoint from which decision makers look at the issue and set parameters for which aspects of the situation they consider important and which they do not. It determines in a preliminary way what criteria would cause them to prefer one option to the other.

Gathering intelligence: Intelligence gatherers must seek the knowable facts and options and produce reasonable evaluations of unknowables to enable decision making in the face of uncertainty. Its important that they avoid pitfalls such as overconfidence in what they currently believe and the tendency to seek only information that confirms their beliefs.

Coming to conclusions: Sound framing and good intelligence do not guarantee a wise decision. People cannot consistently make good decisions using seat-of-the-pants judgment alone, even with excellent data in front of them. A systematic approach will lead to more accurate choices-and it usually does far more efficiently than hours spent in unorganized thinking, particularly in group settings.

Learning from experience: Only by systematically learning from results of past decisions can decision makers continually improve their skills. Further, if learning begins when a decision is first implemented, early refinements to the decision or implementation plan can be made that could mean the difference between success and failure.3

Russo and Schoemaker point out that one of the biggest faults of the decision-making process is that the quality of decisions is often judged on outcome rather than the process that was used to generate the decision. Many people believe that good outcomes necessarily imply that a good process was used. And they assume the converse to be true as well: that a poor outcome necessarily signals a poor or incompetent process. 4 Clearly, this is not true, particularly for decisions that are close (55 percent chance of a good decision and 45 percent chance of a bad decision) or in situations involving a significant amount of outside chance or luck. In fact, a good decision-making process often produces a failure but, on average, succeeds more often than it fails. Russo and Schoemaker illustrate their point with the chart shown in Exhibit 14.2.5

According to Russo and Schoemaker, the way decisions are evaluated will affect the way decisions are made in the future. Thus, in addition to a good decision-making process, the evaluation of decisions is a critical skill. This has serious implications for improving decision making in organizations, particularly for difficult-to-make decisions, such as those related to risk management.

A good conceptual model for the risk management-decision making balancing act is depicted in Exhibit 14.3.



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