Wise Decisions

Wise Decisions

Step Six – Assess Risk

Assessing risk is part of making a decision. Think about and identify the risks of each option. Decide whether the risk is necessary and take the risk only for clearly thought out reasons. Carefully evaluate what the consequences of failure will be and try to make an accurate estimate of the probability that the option will fail. Use this risk factor in evaluating the options.

The basic strategy for assessing risks is the Expected Value Calculation. In the basic risk evaluation formula, EV=PR, the expected value (EV) equals the prize (P) times the risk (R). This is usually used in evaluating investment opportunities and isn’t directly applicable to most major life, career, etc. decisions. However, the concept is useful in understanding risk:
• What is the Prize – what do you hope to gain. Be clear
• What is the Risk – Don’t be overly optimistic or pessimistic
• What is the Expected Value? Be realistic
In Joe’s case, for example, there is a risk that the stock market could take a severe downturn or that he would not be accepted into law school.
  • Welcome to Wise Decisions.com
  • About Decision Making
    • Types of Decisions
    • Decision Making vs. Problem Solving
    • Decisions vs. Outcomes
  • Know Yourself
  • Watch Your Thinking
  • The Seven Steps to Making a Wise Decision
    • Step One – Be Clear about What to Decide
    • Step Two – Gather the Facts
    • Step Three – Set the Criteria for a Successful Decision
    • Step Four – Develop Your Options
    • Step Five – Evaluate Your Options
    • Step Six – Assess Risk
    • Step Seven – Make the Decision and Carry Through
  • Decision Tools
  • Tips & Traps
  • Daniel Roberts
  • Resources
  • Wise Decisions Magazine
  • Wise Decisions Coaching
  • Contact Me


Handcrafted with by HSS. Higher Source Sites. Get in Touch.

© 2023 · Wise Decisions · All Rights Reserved