Risk Assessment: Tools, Techniques, and Their Applications

12.2 Decision Trees

Decision analysis is a very large topic, and there are risk professionals who are specialized only in decision analysis. In this book, we will not attempt to present even a fraction of all the decision analysis tools available. In fact, we will focus on two types of decision trees. Decision analysis and their associated tree analysis techniques assume that a decision is being made under risk. All decisions have some risk associated with them. The launch of the Challenger in 1986 was made under risk. The obvious consequence of this decision was the loss of the orbiter (3). We all make decisions everyday that affect our family's safety, financial security, and health. Some of our decisions also have the potential of affecting many other people as well. Elected officials, military leaders, heads of large corporations, and even university presidents make decisions that can have far reaching effects.

The decisions concerning driving are some of the most important ones we make. Driving is still one of the most hazardous things we do. During an average year, approximately 35,000 people die from car accidents in the United States. Decisions drivers make contribute to a large number of these accidents. Drinking alcohol while driving is directly associated with approximately 12,000 persons dying in alcohol-related traffic accidents in 2008 (4).

There are several styles of decision trees. The style presented here is one that is commonly used in industry. Influence diagrams ...