MSING014: DECISION & RISK ANALYSIS

Core Module Information:

Taught by:
Level:
Prerequisites:

Eligibility:
Terms:
Delivery method:
Assessment:
Kenan Arifoglu
Masters
None
Attendance of Excel workshop in Term 1
Term 2
3-hour lectures/workshop (x 9 weeks)
45% (3 workshop reports); 40% (unseen examination), 10% class participation, 5% Excel workshop exercise in Term 1.

Important business decisions cannot be left to intuition alone. We need to communicate the structure of our reasoning, defend it to adversarial challenges and make presentations that show we have done a thorough analysis. We also need to make sense out of various sources of data, organise the inputs of experts and colleagues, and use state-of-the-art tools to provide analytical support for our reasoning.

The objective of this course is to equip you to be more effective in these tasks. You will develop skills in data analysis, structuring decisions, building decision models, risk assessment, decision making under uncertainty, recognising areas where business analysis can add value, selecting appropriate types of analyses and learn to apply them in a small scale, quick-turnaround fashion.

This is a practical course, which uses state-of-the-art decision support software to illustrate how to apply the methodologies introduced. Therefore, the course consists of a mixture of lectures and computer workshops. The software used in the lectures and workshops is Microsoft Excel, with add-ins @Risk for simulation, PrecisionTree for decision analysis, and Solver for optimisation. To ensure your working knowledge of Excel, we require you to attend a workshop session in Excel in Term 1 and complete the necessary assignment prior to the start of the course.

Upon successful completion of the module, students will be able formalize a managerial decision problem and apply the decision tools to implement the decision. In particular, they will be able to address the following issues:

  • What makes a good decision? What is the role of intuition and analysis in decision making?
  • How can we structure managerial decision problems?
  • How can we cope with an information overload and determine key information?
  • What is risk, and how can we measure and assess it? What is our attitude towards risk?
  • Which tools are available for analysing risk?
  • How should we choose between risky alternatives?
  • What is the value of flexibility and optionality in our decision making?
  • What do we have to be careful with when assessing and managing risk?
  • What is the value of mitigating risks or obtaining additional information?

Framing decisions & creating decision models

  • Optimization model, resource allocation
  • Risk analysis, scenario analysis, sensitivity analysis, Monte-Carlo simulation analysis
  • Decision Analysis, real options


Decision support tools

  • Excel - Solver
  • Excel Add-In - @Risk
  • Excel Add-In - PrecisionTree

Assessment is as follows: 40% for unseen 2-hour paper examination at the end of the course, 15% each for 3 workshop reports during the term, 10% for class participation, and 5% for pre-course Excel workshop exercises.

Recommended textbook Management Science Modeling (Albright and Winston, 2009, 3rd Edition).