Decision Tree Structure with expected value analysis and risk profiles Essay
The organization of East Asian Games may face considerable risks, although the decision tree offers the opportunity for the successful completion of the project and effective management of the East Asian Games. The following decision tree can be applied in relation to the organization of East Asian Games:
East Asian Games
Basically, this decision tree involves three options of the decision to take, including the use of private investments to fund East Asian Games, the use of the government funding, and the use of the combination of both the government funding and private investments. The use of government funding has both positive and negative aspects. The positive aspect of the government funding is the government funding will be stable. On the other hand, the negative effects of the government funding are the high risk of corruption associated with the government involvement in the funding of East Asian Games; the government may be limited in financial resources; the Games may become an unbearable burden for the budget. Positive effects of the private investment funding of East Asian Games including the following: the government will not spend funds on funding the games; revival of business activities in Hong Kong due to the direct investments. On the other hand, negative effects of the private investment funding of the Games are Games will be profit oriented; investors will not fund the games, if they cannot receive profits; it will be extremely difficult to find investors, who can fund fully East Asian Games. In such a situation, the best option is the choice of the combination of the government funding and private investment funding of East Asian Games. The combination of both the government and private investment funding will have a number of positive effects, including Risks associated with private and government funding solely are eliminated. Government can control private investors in terms of quality, whereas private investors will control the transparency of funding of East Asian Games. On the other hand, the negative effect of the combination of the government funding and private investment funding is the complexity of interaction between government agencies and private investors.
In such a way, the combination of the government funding of the Games and the private investments to fund the Games is the best option. In this respect, it is possible to assess three probable outcomes and their value, which may be presented as follows:
0,4 (probability of good outcome) * 1,000,000 (value) = 400,000
0,4 (probability of moderate outcome) * 25,000 (value) = 20,000
0,2 (probability of poor outcome) * 1,000 (value) = 400
In such a context, the use of the combination of the government funding and private investment funding can be effective. In this regard, the risks of the failure of this decision are low, whereas the value of this decision is high and this decision can be highly effective in terms of the successful implementation of the project of East Asian Games.
At the same time, it is important to understand the importance of the adequate assessment of risks and elaboration of alternatives. In this respect, the project should admit the possibility of changing the share of government or investors funding of the Games. What is meant here is the fact that, in case of difficulties, the project should change the share of the government in funding the Games, if private investors fail to fund the project properly, or, in contrast, the project should increase the share of private investments, if the government cannot fund the project.
