When we make a decision, we normally make a number of assumptions about what we expect to happen.
My view of risk management, or should I say risk management that adds value and helps an organization succeed rather than just avoid failure, is all about what might happen.
Anticipating what might happen, evaluating and assessing it, then taking appropriate actions through informed and intelligent decisions, leads organizations to success.
It helps them take the right risks, considering both upsides and downsides, to achieve enterprise objectives.
An assumption is made when you state that you think this or that will or will not happen. If you are smart, you define what event or situation that is, how it could affect your objective, and your assessment of its likelihood.
In other words, you are assessing a risk (if adverse) or opportunity (if favorable).
A forecast is also an assumption, or at least based on a set of assumptions about what will happen.
What we should do with assumptions is monitor them.
But, as Estell and Grant say in Deciding, not all assumptions are equal.
There are some that are incidental and some that are critical.
Critical assumptions are those that, should they not bear out, mean that your objective will probably not be achieved.
Other things are often documented as assumptions, but the…
