Risk management, professional judgement, chaos theory and fuzzy possibility
L. Strobel Stewart · 2003
Professional judgement is an integral part of risk assessment, and an important tool in rationalizing risk management. In order to exercise professional judgement, corporate decision makers make intuitive assumptions about the complex behaviour of businesses and corporations. They implicitly assume (1) a degree of continuity, and (2) the possibility of discontinuities. The informal, professional reasoning that follows from these assumptions is described. Then, the author uses the two fundamental principles of self organization from chaos theory (self similarity, and sensitivity-to-prevailing-conditions), to make these assumptions explicit. Finally, reference is made to a fuzzy implication operator that captures mathematically the informal reasoning inherent in professional judgement. It is argued that the mathematical tools that embody the new operator can make the everyday exercise of professional judgement in risk assessment more consistent and rigorous.