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Decision-making is the process of recognizing alternative courses of action and selecting appropriate alternatives in each decision condition (Galli, 2018). This definition presents two essential parts:
- 1.
Identifying alternative fields of action means that an ideal solution may not exist or might not be recognizable;
- 2.
Selecting an appropriate alternative means that there may be many relevant alternatives and inappropriate options are to be assessed and rejected.
Economic decision-making refers to the process of making business choices that involve money. All economic decisions of any consequence require the use of some accounting data. Frequently, the data is in the form of financial reports. Anyone using accounting data to make economic decisions must understand the business and economic environment, in which accounting information is generated, and they must also be willing to apply the necessary time and energy to make sense of accounting statements. Economic decision-makers are either internal or external. Internal decision-makers are individuals inside a company who make choices on behalf of the company, whereas external decision-makers are outside organizations that make decisions that affect the corporation (Galli, 2018; Galli 2017c).
Internal Decision-Makers
Internal decision-makers decide product selling, taking a risk in a particular market, and hire or fire employees. In all these circumstances, the responsible internal decision-maker decides for the company. Depending on their situation within the company, domestic decision-makers may have access to all of the company's financial information (Badsi et al., 2017; Agrawal & Sharma, 2014).
External Decision-Makers
External decision-makers make choices about a company. They decide whether to invest in a company, sell to or purchase from a company, and lend money to a company. They have access to most, or all of, the accounting information generated by a company, and this accounting information can be used to make decisions on behalf of a company. However, the information is limited. If granted access to this information, they can make decisions for an organization in terms of marketing, sales campaigns, accounting, financial information, production, what to produce, and who to hire (Badsi et al., 2017; Agrawal & Sharma, 2014). External decision-makers narrow financial information, and they only work with the information the company gives them, which in most circumstances is not all the information the company maintains.
Every enterprise must, as part of its business activities, face specific risks that may lead to a reduction in the value of the organization. Therefore, it is necessary to prevent these risks or minimize their impact (Badsi et al., 2017; Agrawal & Sharma, 2014). With this, the importance of risk management grows, including all processes and all kinds of risks concerning their relationships. Many managers believe that they pay close attention to the risks. However, especially in small businesses, the risks are unsystematically, randomly, intuitively, and informally monitored. Quite often, the predominant belief is that the management, or the owner, knows all of the possible risks, so there is no need to separately deal with them (Badsi et al., 2017; Agrawal & Sharma, 2014).
Research Gap
The current literature highlights the current gap in research. While there is a wealth of literature that shows the crucial role that risk plays in economic decision-making. However, there is an evident gap in knowledge regarding how risk enables the smooth progression of economic decision-making. This research stems from the knowledge gaps that exist within the related literature on economic decision-making and risk management. The focus of this study is to evaluate the elements and applications of the most current risk management in the area of economic decision-making. The study sought to examine the overlaps and disparities of these risks in order to understand the differences and similarities between them.