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Identifying Risks The first element of dealing with decision making risks is to identify what those risks may be. EXAMPLE 1: Let's go back to the example we used in "Predicting Outcomes" where Chief Competent is looking to get that new/replacement pumper and he needs to find a way to fund it. Chief Competent considers the potential and most likely outcomes he has available with his four (4) most viable alternatives to get a new replacement pumper for the existing apparatus that is about to completely break down and perhaps also replace his squad, that only carries personnel and no equipment, with a smaller and used first responder apparatus. To come up with the funds, the Chief has identified these most likely outcomes, based off of his alternatives.: Alternative A) Go cry to the municipality to buy the new apparatus or both new pieces of apparatus, if they have the money. The most likely outcomes are yes or no, or potentially as a third outcome, the municipality will tell him to also look at grants, lease the apparatus, and/or look for other sources of funding to supplement what the municipality can afford. Risks: The risk is that the municipality will likely say no, because they are short of funds, they have other projects where funding is committed and necessary and they just don't want to raise taxes, which they may have to do to either get money directly or to issue municipal bonds. Alternative B) Apply for a state and/or federal grant, which he may or may not get, and wait for months on their decision and hope he gets a grant. The most likely outcomes are yes or no and he won't know for months. Risks: The risk are that the state and or feds will take months to make a decision, they may require the VFD to have at least 10% of the cost as a down payments and to meet the local participation guidelines that exists for the grant. Alternative C) Apply for a lease purchase for the new pumper or both pieces of apparatus and hope he can get it and a decent interest rate. The most likely outcome is that he'll get the lease, IF he gets the support and underwriting by the municipality to guarantee payments. Risks: The risk are a bit better here, but the risk may be the amount of interest that the funding source will charge, and what there may be for application and upfront fees. Alternative D) Contact VFD-Funding as a professional consultant to review the options, help write the grants, help secure the lease/purchases and to look at all viable means of funding the acquisition(s). The most likely outcome is a yes, because VFD Funding can get financing for any new or used apparatus or equipment for any fire department, they can arrange leases with only a one page application (some cases no application necessary), they can have a lease arranged in 24 hours, they write grants too, they don't require any up front money for their fees, and they only charge 1% of the total value of the project as their fee on any lease/purchase they arrange and ONLY after they deliver the funding. Risks: The risks here are minimal, because VFD-Funding can find financing for any VFD, they don't require any upfront fees and upon successful funding, the fee is only one percent (1%) of the price of the apparatus. Under this situation, what would you determine to be the best risk vs. reward, outcome and alternative to the problem of needing a new pumper? What would be the decision making limits and level of control of making a decision based upon the risks, the potential outcomes, and alternatives for this decision? EXAMPLE 2: Treasurer Beancounter of Engine Company Alpha decides to take his idea and his identified alternatives about the Sunday night beer, food, gambling, and entertain for the "bingo night widows" and the younger men and women of the community to the company for discussion and a vote. He is prepared to show the company that there is now way for them to compete with Engine Company Beta's bingo and that they've lost money in trying to do so. A) What are the potential outcomes, both positive and negative, of presenting this idea and the information to the company? Are there more than the simple two of "yes" or "no" votes? Risks: The risks here are that the company will vote yes or no, but have many questions about this new idea. The risk for a no vote may be based upon some members wanting to keep the bingo, because the Engine Company Alpha has had a tradition of Wednesday night bingo for over 25 years, thus they would make a decision based upon habit and imitation that other companies use bingo games as a means to regularly raise funds. B) What are the potential outcomes if Treasurer Beancounter says nothing about his idea as an alternative to the losing bingo? Risks: The risks here are that the company will continue to lose money on the bingo game and eventually the company will blame Treasurer Beancounter for not bringing this to the company's attention and suggesting the alternatives and potential outcomes for each C) What are the potential outcomes if the company votes to continue the Wednesday night bingo? Risks: The risks here are that the company will continue to lose money and may have to eventually realize that their Wednesday night bingo will no longer work. D) What are the potential outcomes if the company votes to try this new idea for a new event on the new night? Risks: The risks here are that the company may lose money and/or may lose money initially, until sufficient advertising, including word of mouth, gets out in the area that Engine Company Alpha has this Sunday night fund raising activity. There is also a risk that they may not get an approval from the proper authorities for Sunday night beer sales, or beer sales at any time. E) What other decisions might need to be made if the company votes to adopt the new idea for revenue generation? What might be some of the decision making limits? What about the levels of decision making control? Might other decision making methods be realized for some of the smaller decisions that will become subsequent? Which decision making methods are most likely to occur? What are some of the potentials problems that might need to be addressed? What are the alternatives, positive & negative for these problems/issues/decisions? What are the potential outcomes for these alternatives for the subsequent problems, issues and decisions? Risks: The risks here are that the company will be slow on making the other necessary subsequent decisions. These decisions will have their own limits, levels of control and have various members use any of the five (5) decision making methods to make their decision with their votes. The company generally may not be willing to make these other decisions or take the associated risks. What other risks may exist? EXERCISES: 1) Think of a problem in your personal life and identify at least two (2) positive and two (2) negative alternatives. Predict at least two outcomes, one positive and one negative, for each of these alternatives. Then look at the potential risks that you must take to make this decision, how willing are you to take these risks, and why or why not you are willing to take these risks. 2) Think of at least three (3) problems occurring at your fire department and identify at least three (3) positive and three (3) negative alternatives for each. Predict at least two (2) potential outcomes for each of the three (3) alternatives you have identified for each of the three problems occurring at your fire department. Then look at the potential risks that you must take to make these three (3) fundamental decisions, what the risks may be, how willing are you to take these risks, and why or why not you are willing to take these risks. Last modified: September 21, 2008
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