Classifying Risk Uncertainty for Decision Making

Abstract

Studies of NASA mishaps often reveal a flawed decision-making process – one that underestimates risk. In this paper we turn our attention from the risk itself to uncertainty about the risk. In particular, we look at how decision-making accounts for uncertainties about a risk’s likelihood of occurring and the consequence if it does occur. We propose a simple way of classifying risks according to these uncertainties. Then we use this classification scheme to gain insight into the flawed decision-making that contributed to the Challenger disaster and other NASA mishaps as well. We show how our risk classification scheme can improve decision-making and help avoid mishaps in the future.