its causes and effects, and recommend the actions necessary to minimise such risks in the future. The Report to the President, issued in January 2012, runs into several hundred pages. Some key conclusions include:
• “The loss … could have been prevented.”
• “The immediate causes … a series of identifiable mistakes … that reveal … systematic failures in risk management.”
• “None of [the] decisions … in Figure 4.10 [Examples of Decisions that Increased Risk at Macondo while Potentially Saving Time] appear to have been subject to a comprehensive and systematic risk-analysis, peer-review, or management of change process.”
• Columbia Space Shuttle. On 1 February 2003, space shuttle Columbia broke up as it returned to Earth, killing the seven astronauts on board. The Accident Investigation Board reported in August 2003, and showed that a large piece of foam fell from the shuttle's external tank on re-entry, which breached the spacecraft wing. The report also noted that:
• The problem … was well known and had caused damage on prior flights; management considered it an acceptable risk.
• “… the accident was probably not an anomalous, random event, but rather likely rooted … in NASA's history and … culture.”
• “Cultural traits and organizational practices detrimental to safety were allowed to develop, including … a reliance on past success as a substitute for sound engineering … [and] … organizational barriers that prevented effective communication and stifled professional differences of opinion.”
1.2 General Challenges in Decision-Making Processes
This section covers some of the general or contextual challenges in decision-making processes, including that of achieving an appropriate balance between rational considerations and intuition, as well as the possibility of the presence of a variety of biases.
Most decisions are made based on a combination of intuition and rational considerations, with varying degrees of balance between them.
Intuitive approaches are typically characterised, driven or dominated by:
• Gut feel, experience and biases.
• Rapid decision-making with a bias to reinforce initial conclusions and reject counter-narratives.
• Ignoring or discounting items that are complex or not understood well.
• Little (formalised) thinking about risks, uncertainties and unknowns.
• Little (formalised) decision processes or governance procedures.
• Lack of transparency into decision criteria and the importance placed on various items.
• Seeking input from only a small set of people, rather than from a diverse group.
At its best, intuitive decision-making can be powerful and effective, e.g. low investment nevertheless resulting in a good decision (generally). Indeed, justification for such approaches can be made using the framework of “pattern recognition”; that is, the decision-maker (typically subconsciously) views the particular situation being faced as being similar (or identical for decision purposes) to other situations that have been experienced many times before. Thus, such approaches are most appropriate where a particular type of situation is faced frequently, or where the consequences of a poor decision are not significant (or can be reversed), or in emergency situations where a very rapid decision is required. Examples include:
• Planning at what time to leave to travel to work in the morning, which may be based on many years of (non-documented) experience of using the same route.
• An experienced driver who is not overtly conscious of conditions on a road that he drives frequently, but is nevertheless making constant implicit decisions.
Of course, intuitive-driven approaches can have their more extreme forms: an article in The New York Times of 20 October 2013 (“When C.E.O.'s Embrace the Occult”) reports the widespread use of fortune tellers by South Korean executives facing important decisions.
Rational approaches can be contrasted with intuitive ones, and are characterised by:
• Non-reliance on personal biases.
• Strong reliance on analysis, models and frameworks.
• Objective, holistic and considered thinking.
• Self-critical: ongoing attempts to look for flaws and possible improvements in the process and the analysis.
• Openness to independent review and discussion.
• Formalised processes and decision governance.
• Setting objectives and creating higher levels of transparency into explicit decision criteria.
• A desire to consider all factors that may be relevant, to incorporate alternative viewpoints, the needs of different stakeholders, and to achieve diverse input from various sources.
• Explicitly searching out more information, a wide variety of diverse inputs and the collection of data or expert judgement.
• Openness to use alternative tools and techniques where they may be appropriate.
• Willingness to invest more in time, processes, tools and communication.
• Exposing, challenging, overcoming or minimising biases that are often present in situations where insufficient reflection or analysis has taken place.
• (Usually) with some quantification and prioritisation.
• (Ideally) with an appropriate consideration of factors that may lead to goals being compromised (risks and uncertainties).
Many decisions are made based on a combination of intuition and rational considerations; clearly formalised risk assessment is concerned in principle with increasing the rational input into such processes.
Intuitive approaches may be less reliable for decisions concerned with major investment or with very long-term implications; it would seem logical that no management team could genuinely have already had very significant experience with large numbers of very similar or identical projects over their full life cycle.
On the other hand, it is probably fair to say that intuition is generally the dominant force in terms of how decisions are made in practice:
• A course of action that “feels” wrong to a decision-maker (but is apparently supported by rational analysis) is unlikely to be accepted. Similarly, a course of action that “feels right” to a decision-maker will rarely be rejected, even if the analysis would recommend doing so; rather, in each case, invariably one would search for factors that have been incorrectly assessed (or omitted) from the rational approach. These may include important decision criteria that were overlooked, or other items that a team conducting the analysis was not aware of, but which were relevant from a decision-maker's perspective.
• In most business situations, there will almost always be some characteristics that are common from one project to another (otherwise the company may be straying from its core competence), and hence intuitive processes have some role. As a result, even where the use of rational approaches would seem appropriate (e.g. major investments, expansion
