COURSE SYLLABUS RISK MANEGEMENT Course code: VJU6315 Number of credits: 02 Prerequisite courses: Quantitative Analysis Teaching language: English Lecturers Peijun Guo; Professor; Ph.D.; Faculty of Business Administration, Yokohama National University Course objective This course introduces several types of risk involved in business and economics and mainly focuses on decision approaches under uncertainty, such as, expected utility theory, scenario planning, prospect theory and the one-shot decision theory Home works are assigned to students to deal with actual data using spreadsheet software such as Excel Expected learning outcomes 7.1 Knowledge competence Acquire general knowledge about risk and know how to deal with different type of risk by using appropriate approaches 7.2 Skills Strongly enhance quantitative and analytical skills 7.3 Ethics Know how to make an appropriate decision by means of a scientific attitude Assessment methods/Grading system 8.1 Attendance & class participation Regular attendance and participation in class discussion will account for 20% of the class grade 8.2 Midterm & final exams Group presentations by student teams will be given in the middle part of the class Students will be evaluated both collectively, based on the presentation, and individually, based on a mid-term essay submitted to the instructor on the presentation day describing how the individual contributed to the group presentation and what s/he learned from the experience The group presentation and mid-term essay will count for a combined 20% of the class grade A final essay-based exam will be given at the end of the class The grade on the exam will account for 60% of the class grade Leaning materials 9.1 Required textbook and other material No 9.2 Reference material Pratt, J., Raiffa H and Schlaifer R., Introduction to Statistical Decision Theory, The MIT Press, 2008 Goodwin, P and Wright, G., Decision Analysis for Management Judgment, Fifth edition, Wiley, 2014 10 Course description Risk management is always a critical concern for managers in all kinds of industries due to the fact that each action can bring multiple possible outcomes including very good and very bad ones and which one will occur cannot be known in advance This course gives a brief introduction to different kinds of risk involved in business and economics and a detailed introduction to how to deal with them using appropriate methods This course not only involves theoretic parts, such as expected utility theory, scenario planning, prospect theory and the one-shot decision theory but also applications such as behavioral financial management, strategic decision making, risk management in supply chain etc By learning this course, students should understand the fundamental concepts and principles of risk management, and should solve a real-world problem using related knowledge 11 Course contents Part 1: Multiple criteria decision making problems This part looks at how decision makers make intuitive decision involving multiple criteria Such intuitive decision making is usually ‘unaided’-it means that people face decision without the support and structure provided by the decision-analysis methods We introduce several approaches and applications Part 2: The approach: SMART This part explores how decision analysis can be used to support decision makers who have multiple objectives A well-used and powerful approach, SMART is introduced in detail and its application to an office location problem is given Part 3: Decision under ignorance This part introduces several decision criteria, such as maxima, maximin, and minimax regret An application to real estate investment is given Part 4: Introduction to probability This part shows how the concept of probability can be used to provide a measure of uncertainty Part 5: Methods for eliciting probabilities In this part, several widely used methods for eliciting probabilities are introduced for the case that the uncertainties facing managers concern unique, or relatively unique, events-such as the likely success of a new advertising campaign or a new product launch Part 6: Heuristics and biases in probability assessment This part introduces several probability assessment methods based on heuristics and the biases possibly involved Part 7: Decision making under uncertainty In this parts, the expected utility theory is introduced for decision making under uncertainty Part 8: Decision trees and influence diagrams In this part, the multi-stage decision making under uncertainty is modelled by a decision tree and an optimal solution is given A well-used method for helping the manager to construct a decision tress, that is, influence diagram is introduced Part 9: Revising judgements in the light of new information In this part, we look at the process of revising initial probability estimates in the light of new information by using Bayes’ theorem Part 10: Decision framing and cognitive inertia In this part, we discuss the role of creativity in decision option generation We analyze laboratory and real-world research on our ability to analyze a decision problem form more than one perspective and creatively improve our decision making Prospect theory, one of the most important descriptive theories of decision making is introduced Part 11: Scenario planning Scenario planning is an alternative way of dealing with uncertainty than that encapsulated in decision analysis This part outlines the conceptual approach, provides a step-by-step guide to scenario construction and introduces a simple method of evaluating current decisions against scenarios of plausible futures Part 12: Application for strategic decision making A case study: reviewing the future healthcare workforce is introduced to see how scenario planning works in practice Part 13: One-shot decision theory A scenario-based decision theory under uncertainty is introduce to show the difference from the other existing theories and how it works Part 14: Application for newsvendor problems for innovative products A newsvendor decision model for innovative products is introduced and the behaviors of different types of retailers are analyzed Through this example we can learn the detail about how to use the one-shot decision theory to deal with the decision problem under uncertainty Part 15: Final examination A one-hour paper-based examination is given to identify the mastery levels of knowledge of course participants