Decision Making Tree
The Decision Making Tree method is used to quantify the probability and impact of a risk in numerical terms. One of the samples of risk assessment in this article, is the attached image in this section; which illustrates the Decision Making Tree method.
An office picnic is planned which is entirely dependent on the weather. There are many variables which determine its outcome, but the deciding criteria is that the result to be a value of 0.65/1 or 65%. As per information generated via risk reports and weather conditions, the following data is assembled.
Chance of good weather: 30%
Chance of bad weather: 70%
Chance of picnic in good weather: 60% = (i.e. 40% chance of no picnic)
Chance of picnic in bad weather: 20% = (i.e. 80% chance of no picnic)
Using the Decision Making Tree for this risk assessment, the data for the entire tree has to be processed and calculated. The procedure for calculating this is;
[probability of picnic in good weather ] + [probability of picnic in bad weather]
i.e. [good conditions] + [bad conditions]
= [0.30 x 0.60] + [0.70 x 0.20]
= 0.18 + 0.14
This can also be translated as a 32% probability for a picnic. While the cut-off criteria for the picnic is 65%, the idea for having a picnic can be cancelled. According to the calculations, the risk for holding a picnic are just too high. It will never succeed.