Future Decision Making

Future Decision Making
It is vital to make future business decisions based on facts and understanding of consequences other than the faith on personal judgment of a situation. Some past decisions affect the outcome of future decisions. Managers should avoid abstract over-precision at all costs while making business decisions. It is impossible to consider all the infinite number of ways that decisions could go wrong. Managers should write down the pros and cons of past decisions they have made and use the same as a reference to making better business decisions. One should not build on commitment based on wrong past decisions but use the same as a learning curve to do better. As a manager, one should also avoid making future cost decisions based on sunk costs.
The fallacy of sunk cost leads to reasoning that often leads to poor or wrong decision making.  In the above scenario, the sunk cost s of activity is considered while making future decisions about an event.  Sunk costs affect financial modelling in businesses where DCF models look at future cash flows other than the past cash flows. In business and economic decision making, sunk costs should not be considered as they have already happened and cannot be recovered. They are excluded from business decisions since they will remain constant regardless of the outcome. Taking consideration of sunk costs when making decisions leads to irrational decision making within the organization. Future cost-benefit analysis is a crucial part of decision making. It measures the benefits of a decision or action taken minus the costs associated with taking such an action.  In business, such an analysis involves measurable financial metrics, such as costs saved or revenue earned.  Future costs benefit affects the types of business decisions that are made. As managers, the benefits of future decisions should outweigh the costs associated with making decisions.

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