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IAI Actuarial Core Principles · Business Management · Strategy, competitive advantage, strategic decision process and PEST analysis

A pension consultancy in Pune is choosing between three expansion strategies. The directors list criteria such as expected return, regulatory risk and fit with existing skills, assign weights to each criterion, and score every strategy. What is the main benefit of this weighted scoring approach to the decision process?

The benefit is that weighted scoring makes trade-offs explicit and the evaluation transparent and comparable across options. It does not remove uncertainty, guarantee the best return, or replace objective setting and monitoring, because the weights and scores still rely on subjective judgement.

  1. AIt guarantees the highest-return option will be selected
  2. BIt removes all uncertainty about future outcomes
  3. CIt makes the trade-offs explicit and the evaluation transparent and comparableCorrect
  4. DIt eliminates the need to monitor the decision after implementation
  5. It replaces the need to define objectives

Explanation

Weighted scoring structures the comparison and exposes judgements, helping stakeholders see why an option was favoured. It cannot remove uncertainty, guarantee returns, or replace objectives and monitoring, and the weights themselves remain subjective.

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