The Management of Extreme Risks

Sergio Scandizzo

The Meaning of Strategy

In all human endeavours we are faced with various degrees of complexity. Sometimes all the information we need to make a decision is readily available or we are able to process the existing information in order to get what we need. In these cases we decide by comparing the outcomes of all options and we choose what we deem to be the best on the basis of some set of predefined criteria.^11. Of course, making decisions on the basis of one or more criteria is a difficult task in its own right, to which an extensive amount of research has also been devoted. Sometimes, however, the information is not there and, no matter how much processing power we are willing to throw at the problem, we cannot have a complete picture of decisions and consequences.

Examples of the first kind of problem are a game of noughts and crosses, choosing from a restaurant menu (a trusted one, at least) and deciding which mortgage to take after comparing conditions offered by all available banks. Examples of the second kind are a game of chess, choosing a product mix or a market mix for a specific company and deciding what actions to take during an electoral campaign.

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