Managing uncertainty

Abstract

There is uncertainty in all aspects of life. In business, this uncertainty particularly manifests itself in system performance, risks, cost estimation, and benefits. How can these uncertainties be managed to the advantage of the enterprise? This paper provides a strategic approach to managing uncertainties in a decision-making environment. It is based upon four processes: 1) a means for the analytical decomposition of sources of uncertainty, making them visible to both the analyst and the manager; 2) a method for rapidly capturing existing information for all parameters from a heterogeneous array of sources and using these in decision models; 3) an information value analysis process (IVAP) for developing a cost-effective strategy for acquiring new information; and 4) a means to present results and their implications on-line in an easily understandable `what-if' response mode.