Importance of decision-making in public companies

Discuss About The Detecting Fraudulent Reporting Financial.

Decision-making deals with the regular activities of the individuals and the firms. When it comes to a large public company, decision-making is a process as well as a habit. Successful and Effective decisions make profit to the company and unsuccessful making of decisions make losses (Heyler et al.2016). Therefore, the process of corporate decision-making is the most critical operation. In the process of decision-making, a certain course of action from a few possible alternatives is chosen. Many tools, techniques and perceptions are used. Additionally, both personal decisions and collective decisions are considered. In usual case, the process of decision-making is hard task (Block et al. 2016). In most of the cases, the corporate decisions involve level of conflict or dissatisfaction with another party.

The initial process of decision-making is the identification of the purpose of the decisions. Here the pros and cons of the strategy are thoroughly analyzed. When a financial proposal is given, there arise many issues from the divisional directors there are various questions that are to be answered in this step (Romiszowski 2016). The questions are:

What is the exact issue?

Why the issue is needed to be solved?

Who are the parties affected by the issue?

Does the issue have a specific time-line or a deadline?

The next step is gathering of the informations, the decision-making issues of a firm consist of many stakeholders. Additionally, there can be ample of factors involved and affected by the problem. In the issue solving process, the information related to the factors of the shareholders is gathered with tools such as ‘Check Sheets’ are effectively used (Royo-Vela and Hünermund 2016).

The following step is finding of the alternatives. In this step, the main criteria for the judgment of the various substitute and alternatives are set up. While defining the criteria the goals of the organizations and the culture of the company must be taken in consideration (Snyder. and Diesing 2015). For example, one of the main concerns in all the process of decision-making is profit. The large companies unless it is an exceptional case, do not make decisions that reduce profits. Similarly, base principles should be identified related to the in hand problem.

The next step is listing down of all the ideas, which are considered as the best option. Before the idea generation step, it is important to understand the reasons of the issues and prioritization of issues. For this, Cause-and-Effect diagrams and Pareto Chart tool are used. Cause-and-Effect diagram enables in the identification of all possible reasons of the issues and Pareto chart helps in the setting the priorities and identify the cause and effect of the issue (Saaty 2008).

Steps in the decision-making process

In the next step deals with judging the principles and criterion of decision-making to evaluate the alternatives. The experience and effectiveness of the judgment principles ate taken in hand. The pros and cons of the alternatives are analyzed.

Once the evaluations of the issues are done and the best alternatives are found out the selected decision is informed and implementation takes place. Then after the execution the outcome is obtained((Royo-Vela and Hünermund 2016).There is complete utilization of the resources and sound management. This technique is one of the best practices of decision-making and can increase the profits as well as the production.

Most of the decisions that the management faces issues are due to the level of uncertainty, complexity and ambiguity (Saaty 2008). This is because most of them are unprogrammed. A manager is someone who analyses the results of the cases and takes decisions according to the objectives of the organization. When a financial expenditure proposal is given to a managing director, the various issues that are faced by the manager are as follows:

Issues of measurement:  Identification and measurement of the costs and effects of the decision of a proposal of capital expenditure tends to be difficult. This is more so when a capital expenditure has to bear some other company activities like cutting into sales of some existing product or consequences that are tangible like improving the worker moral.

Uncertainty: Costs and benefits are involved in the capital expenditure decisions that extend for into future. It is impossible to make the prediction as to what exactly is going to happen in future. Therefore, there is an existence of a huge uncertainty featuring the costs and benefits of the decision of a financial expenditure proposed by the directors.

Temporal Spread:  Over a long period of time the costs and benefits associated with a capital expenditure decision are spread out, usually for industrial projects it takes 10-20 years and for infrastructural projects it needs 20-50 years. Such a temporal spread creates some issues in discount rates estimation and establishment of equivalence.

There exist many measures to the issues faced by the managers in taking the managerial investment decisions that give firms an estimation of the return over many investment projects. To be able in determination of a specific projects value, the three most methods that are commonly used – payback method, net present value method, and the IRR methods (Royo-Vela and Hünermund 2016). These are the different kind of ways that are put to use while taking financial investment decisions.

Challenges in financial decision-making

Conclusion

 In times of making decisions, the managing director must   always weigh pros and cons of the consequences of the business and should be in favor of the positive results.

This helps to eradicate the possible losses of the organization and keeps a smooth functioning of the business with sustained growth. At times, avoiding decision-making seems  to be easy  specially, when there is a  lot of confrontation after finalizing the toughest  decision.

However, decision-making and acceptance of its consequences is the only method to stay in control of business operations.

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