What is Modified Coinsurance and How it Works
A reinsurance contract is essentially a contract between a ceding insurance company as well as a reinsurance company. Under plain vanilla reinsurance contracts, the premiums, as well as risks, are transferred proportionately from the ceding insurer to the reinsurance company. In some cases, this arrangement is not acceptable to one or both of the parties. […]
Netting, Close Out, and Acceleration
Netting is a procedure that is commonly used by organizations all over the world to reduce their counterparty credit default risk. However, in order for the netting procedure to be carried out, companies should have contracts in place prior to the default event taking place. There is another procedure called close-out which is closely related […]
Political Revolutions
The Nature of Political Revolutions An often-overlooked aspect of the modern political economy is the capacity for change and renewal that is inherent in the way modern democracies work. Despite reversals of democracy where world over we are witnessing the retreat of democracy, there have been notable exceptions to the norm wherein some social and […]
Role of Leaders/Managers in Crisis Management
A sequence of sudden, unplanned and unexpected events leading to instability in the organization and major unrest amongst the individuals is called as crisis. Crisis generally arises on a short notice and causes major disturbances at the workplace. Leaders and managers play an extremely important role during crisis. One should lead from the front. Show […]
Cyber Risk in Reinsurance
The global business environment has turned increasingly digital in the pasts few years. It is very common for businesses across the world to conduct most of their business online. This includes transacting with customers, employees, suppliers, and even the government. It is for this reason that the role of computers has drastically increased within the […]
An important concept in the field of decision making is the OODA Loop or the Observe-Orient-Decide-Act loop. This refers to the strategic advantage that a decision maker gets over his or her opponent when he or she observes the situation and orients themselves and then decides and acts accordingly.
This concept was introduced primarily in combat and strategic warfare where it was believed that a combatants “edge” over his or her opponent happens when the OODA loop is fully functional.
The term and the concept were proposed by the military strategist and member of the United States Air Force, Colonel John Boyd.
The theory underlying the OODA loop is that decision making within our minds happens according to the way in which the recurring loops of observation, orientation, decision and action happen in response to a situation.
The basic premise is that decision makers must be agile and alert to the situations and have a clear head and cool mind to take a decision lucidly and cogently.
The diagram above describes how the OODA loop works in real life situations. The inputs from the environment are taken by means of information, interaction with the environment and the circumstances that unfold with the interaction. Then the orientation to the situation happens by means of the individual’s internal processes and the perceived expectations along with his or her own conditioning.
Then the next stage where the decision has to be taken takes over where the information from the situation meets the individual’s thought processes leading to decision making capabilities.
Finally, the decision leads to the action where the decision is actualized and made operational.
The important thing to remember about the OODA loop is that feedback is an integral component of all stages with information flowing back and forth between the individual and the situation.
The point to note is that the OODA loop calls for exemplary mental and physical fitness (the latter more so in actual combat situations). The need for this fitness is that the decision maker ought to seize the situation and then comprehend the same along with an ability to take quick decisions on the spot depending on the way the situation unfolds.
Though the concept was introduced in the Armed forces, this is being regularly applied in the corporate world as well. The reason being that the OODA loop and the concept of decision making that it imply is a sound idea and something that can be used to improve the decision making process.
In the hectic corporate world, there is often no time to lose especially when quick decisions have to be taken and hence the OODA loop provides a good basis to the decision making and the way in which the decision makers can go about their decision making process.
In conclusion, the succeeding articles would look at each of the components of the OODA loop in detail and the concept would be discussed thoroughly and comprehensively.
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