CBS Decision Making & Problem Solving 2

Question 1

A company must choose between two projects. Project A has an expected value of $500K with moderate risk; Project B has an expected value of $600K but high variance. Which decision-making principle suggests choosing Project A for a risk-averse organization?

Accepted Answer

Expected utility theory

Answer

Expected utility theory accounts for risk preferences, meaning risk-averse decision makers favor lower variance even when expected monetary value is slightly lower.

Question 2

When a problem is described as 'ill-structured,' what does this primarily mean for the problem solver?

Accepted Answer

Goals, methods, and constraints are not well-defined

Answer

Ill-structured problems lack clear goals, solution methods, and constraints, requiring creative and iterative approaches rather than standard procedures.

Question 3

A strategist uses sensitivity analysis after building a financial model. What is the primary purpose of this technique?

Accepted Answer

To identify which input variables most affect the outcome

Answer

Sensitivity analysis tests how changes in individual inputs affect outputs, revealing which assumptions carry the most decision risk.

Question 4

During a crisis, a business strategist applies the concept of 'satisficing.' Which behavior best illustrates this approach?

Accepted Answer

Selecting the first option that meets a minimum acceptable threshold

Answer

Satisficing, coined by Herbert Simon, means accepting a 'good enough' solution rather than exhaustively searching for the optimal one.

Question 5

A root cause analysis reveals that a recurring quality defect stems from operator error during shift changes. Using the 5 Whys method, what outcome is expected after fully applying the technique?

Accepted Answer

Identification of the systemic process failure underlying the symptom

Answer

The 5 Whys method iteratively asks why a problem occurred until a root systemic cause—not just a surface symptom—is uncovered.

(CBS) Certified Business Strategist Practice Test

(CBS) Certified Business Strategist Practice Test

CBS Decision Making & Problem Solving 2