Using Integrated Stochastic Process for Strategic Project Selection Decision-making
Decision theory has been used for past centuries to aid decision-makers either in personal life or business ventures. Not until recent years have risks and risk management techniques been brought into the decision-making processes. Capital investment project decisions were often made without formal risk-based evaluation processes, and risk implications of decisions for the project execution phase were not sufficiently considered, hence turning many good proposals into economic disasters.
The integration of qualitative risk assessment and quantitative risk evaluations on various project options at the feasibility study phase is paramount in making wise strategic decisions, and the stochastic process embracing probability theory can further enhance decision quality. This approach has also been theoretically challenged through prevailing literature reviews on the science of decision-making, and has been practically tested at major corporations. The process works effectively for making strategic business decisions within a macro environment, including risks and uncertainties such as political instability, unfavorable economic outcomes, challenged social-cultural impacts, and unproven technologies or innovations (PEST). Its application serves a wider range of business scenarios from major oil exploration and the location of major refineries, to large business acquisitions and key expansions for the sake of business growth under risk conditions in a macro-environment.