Teik Heng Tan, Executive Director, The Investment Innovation Institute [i3]

A Small Lesson in Decision-making under Uncertainty

An attempt to simplify complexity

Last week, we made the tough decision to postpone a regional investment forum in Australia. In hindsight, most would think that the decision was a no-brainer, given the increasing severity of the coronavirus pandemic.

However, it wasn’t as straight-forward as it seemed. Why?

Being rational

Unlike China and increasingly Europe, the situation in Australia was far less serious (at the time of this writing). Despite being impacted since the initial outbreak in Asia, the increases in infection in February looked under control. It was still, more or less, business-as-usual.

For us, it was just about monitoring the situation.

As the bad news started to stream out of Europe, a handful of our international delegates dropped out due to government travel restrictions. However, in the context of the entire forum, this number was marginal. When we surveyed the others, most of the other delegates were still keen to travel and participate.

It was also interesting to note the polarity of opinions amongst our delegates. On one end of the spectrum were those who were very concerned about the health risks, while on the other end people felt strongly that it was simply ‘a storm in a teacup’, blaming the media for the exaggerations.

Isn’t this just a case of serious flu?

From a decision-making standpoint, it was confusing at best. We face criticism from either group with any decision. And when this happens, inertia kicks in – we do nothing. Our plans remained unchanged at that stage.

Part of me wished that something drastic would happen e.g. the situation would deteriorate considerably or that a miraculous vaccine discovery would be announced. I was looking for a clear-cut scenario to delegate my decision, but situations are rarely black or white.

Imperfect answers

We grow up believing in the objectivity of science. Medical experts, who must be aware of the uncertainty and fluidity of the situation, are invariably expected to ‘pluck a number’ to satisfy the information void – be it 24 hours, or 500 people or ‘starting on Monday’. Unfortunately, this is then over-analysed by non-medical commentators, adding to the confusion.

In the midst of on-going uncertainty, how do we frame our decisions? How can we provide definitive answers to issues that evolve quite quickly? More importantly, how do we continue to maintain confidence when our so-called objective answers are changed frequently?

Hitherto for us, we were still going to be guided by the commercial outcomes, factoring in our assessment of risk.

We’re in business to make money. Unless the event P&L tells us otherwise, why should we detract from that?

From an event management perspective, the forum was still commercially viable. Despite the dropouts, there was still reasonable attendance and financial support to make it work.

My gut was beginning to feel uncomfortable, but I couldn’t justify any change.

There is also an element of market timing (or luck?). What if the environment eventually deteriorates, but not in the short term? Maybe things will only get worse in the winter months? Maybe there is still a window of opportunity for us to sneak in?

Such analysis looks logical, but it is academic in reality. It’s just too hard to predict ahead, which means decision-making is relegated to a day-by-day wait-and-see.


The atmosphere started to change when the World Health Organisation (WHO) declared a pandemic and President Trump instituting a travel ban on the Schengen region.

Our layman assessment of the health situation in Australia remained unchanged from earlier. The increase in infections were marginal but the paranoia and fear in the community was becoming more evident.

Using the same commercial yard stick to analyse, we reached the same conclusion as before. On surveying delegates for further feedback, the same polarising answers surprisingly remained.

There’s no easy way. We’ve done our homework to engage with our constituency, but the judgement call remains our responsibility.

Are commercial considerations sufficient? Have the risk factors increased? Beyond the numbers, is it about the gut feel? Do we have the courage to make the call?

I’m reminded of a similar but unrelated issue on the role of investors in climate change. Should they adopt a shareholder model (i.e. maximising returns) or stakeholder model (with a wider responsibility incorporating community considerations). Implicit in these models is the notion of investment horizons.

In re-visiting the decision, we then reframed our commercial objectives in the context of the community and our beliefs.

With that decision-making framework, it then became obvious for the need to re-schedule the event.

Focusing on our community and stakeholders’ well-being should be central to our beliefs and it also preserves our integrity and reputation. Maximising returns is important but, in this case, it’s translated to minimising the loss.

Adhering to those principles also meant the obligation to offer delegates the unconditional option of a full refund or a credit to the future event, despite circumstances beyond our control. This is regardless of whether we enjoy the same treatment from the hotel and other suppliers. It’s a tough act!


The sense of relief from reaching this conclusion is indescribable. We probably secretly desired a confirmation bias, hoping for a drastic deterioration of the situation to justify our wisdom. Obviously, that’s socially unconscionable.

Reflecting on our earlier decisions, I wondered if that meant we didn’t care about the community when we pursued the route dictated by our commercial objectives. At the risk of sounding defensive, I think the shareholder vs stakeholder model should be perceived as a continuum and applied judiciously as the situation evolves.

We might be applauded for being proactive and community-centred if we made the decision much earlier, but what about the fiduciary responsibility to the business and its constituents?

This experience may seem overly simplistic to many others. However, I think it resembles a microcosm of the current complexity that society faces.

  • As leaders, how do you make decisions under uncertainty?
  • Do you attempt to create a framework that can accommodate the fluidity of the situation? Or is it more practical to make the judgement call, then create a framework to justify that decision?
  • Transparency is always applauded. But do you have the guts to give an honest assessment that sounds vague at best? Or do you try to give imperfect answers to your constituency, knowing that you might have to back-track soon after?
  • Erring on the side of conservatism i.e. advocating the worst-case scenario seems like a safe bet, where you protect your downside risk with plenty of upside. But is that being a responsible manager?
  • And finally: the x-factor. How do you manage your gut feel? How about courage? 


[i3] Insights is the official educational bulletin of the Investment Innovation Institute [i3]. It covers major trends and innovations in institutional investing, providing independent and thought-provoking content about pension funds, insurance companies and sovereign wealth funds across the globe.