AIMS OF THE RESEARCH:
To explore the decision making processes of top
management, CEO's and boards of directors - to
gain ne~ insights into the causes of management
decision failures, management risk and decision
process weaknessess.
To identify important factors that play a
pivotal role in effective decision making in
business situations.
To draw up a frame~ork for effective decision
making based on the correlations between
decision theory and empirical findings amongst
senior executives and board members.
To find ways how management can minimize the
risk of decision failure in complex problems,
what questions they have to ask themselves about
the way in which they make decisions, what decision
risks they have to be aware of at each stage of
the decision process and how they can gain from
available decision theory. The aim is to improve
the decision process to obtain better overall
quality of decisions produced by kno~ledgeable
senior managers and board members.
This will provide a framework for effective third
generation risk management.
EXECUTIVE SUMMARY OF THE RESEARCH FINDINGS
Board members and top executives rely on experience
and personal knowledge to analyse complex problems
and do not consciously involve concepts from
decision theory (see section 8.5). They describe
these phenomena in their organisations, but they have
not formally done a decision process analysis to
minimise decision risk.
Current risk management practises in modern
financial institutions focus mainly on risk
classification techniques and structural
mechanisms (see section 15) to control risks, with
little or no attention to decision process dynamics.
The Board of Directors and Top Management are
generally very good at identifying corporate risks,
economic risks and financial risks, but they have
great difficulty in identifying internal decision
process risks within the management hierarchy/system
or amongst themselves. Introspective analysis of
their own decision process dynamics can help to
improve this.
A step by step analysis of the decision process in
the board and top management team as described in
section 18.2 is proposed as a further contribution
to improve the quality of decision making in
financial institutions. Structural changes to
boards like those introduced by Cadbury improved
second generation risk management practices. This
research proposes that further advances can be made
by third generation risk management improvements in
the decision process dynamics.
We teach decision makers about economic and financial
analysis and derivatives and risk management, but the
fundamentals of decision science and the human
decision process seem to be ignored. To prevent the
financial failures that so often destroy shareholder
value, we need to focus on decision science and
financial decision process analysis
Analysis of the decision process dynamics is
proposed as a way to reduce the number of decision
failures in large financial institutions and other
organisations. By increasing the a~areness and
kno~ledge of board members and top executives about
the potential causes of decision failure, their own
ability to identify and prevent these will be
improved.
New risk management structures and recent changes to
board structures have contributed greatly to
corporate governance but could not prevent many of
the financial failures. Combining these
structural improvements with an additional focus on
decision process analysis can increase our ability
to manage risk successfully. / Business Leadership / DBL
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:unisa/oai:uir.unisa.ac.za:10500/16260 |
| Date | 01 1900 |
| Creators | Van der Merwe, Altus |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | 1 online resource (225 leaves) |
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