VIKOR (VlseKriterijumska Optimizacija I Kompromisno Resenje)

VIKOR (VlseKriterijumska Optimizacija I Kompromisno Resenje) is a multi-criteria decision-making (MCDM) method developed by Serafim Opricovic in 1998. It is designed to find and rank a set of compromise solutions from alternatives that have conflicting criteria. Its core mechanism considers both maximizing group utility and minimizing individual regret by calculating the distance of each alternative from the Positive Ideal Solution (PIS) and Negative Ideal Solution (NIS). Within risk management, VIKOR serves as a practical tool for the 'Risk Evaluation' step (Clause 6.4) in the **ISO 31000:2018** framework. When an enterprise must prioritize risk scenarios based on multiple conflicting criteria like cost, technical feasibility, and regulatory impact, VIKOR provides a structured, quantitative model to identify the most balanced solution acceptable to the decision-making group, distinguishing it from methods like TOPSIS that solely seek the optimal solution.

Enterprises can apply VIKOR for risk management through these steps: **Step 1: Frame the Decision and Assign Weights.** Following **ISO 31000:2018** guidelines, identify key risk evaluation criteria (e.g., financial impact, operational downtime) and the risk response options (alternatives). Use a method like the Analytic Hierarchy Process (AHP) to engage stakeholders in assigning objective weights to each criterion. **Step 2: Execute the VIKOR Algorithm.** After creating the decision matrix, determine the best (PIS) and worst (NIS) values for each criterion. Apply the VIKOR formulas to calculate the group utility (S) and individual regret (R) values for each alternative, then combine them into the VIKOR index (Q) for ranking. **Step 3: Analyze and Validate the Decision.** The alternative with the lowest Q value is the best compromise solution. Decision-makers must then verify that this solution meets the conditions of 'acceptable advantage' and 'decision stability' to ensure the result's reliability. For example, a semiconductor firm used this method to evaluate supply chain disruption strategies, improving supply chain resilience by 25% while keeping extra costs within a 5% budget increase.

Taiwanese enterprises face three main challenges when implementing VIKOR: **1. Subjectivity of Data Sources:** Input values for risk assessment often rely on expert opinions, which can be biased. **Solution:** Implement Fuzzy VIKOR or use probabilistic linguistic information to convert ambiguous judgments into computable interval values. Establish a cross-functional review team and use consensus-building techniques like the Delphi method to mitigate individual bias. **2. Lack of Objective Criteria Weighting:** Weights assigned solely by senior management may not reflect true operational risk priorities. **Solution:** Use objective weighting methods like the Entropy Weight Method, which derives weights from data variance, and then fine-tune them with expert input to create a balanced model. **3. Scarcity of Tools and Talent:** The VIKOR calculation is complex, and there is a lack of ready-to-use software and personnel with MCDM expertise. **Solution:** Initially, use Excel templates for training. For long-term application, partner with consultants like Winners Consulting to implement a custom Decision Support System (DSS) to automate the process. The expected implementation and training timeline is 3 to 6 months.

Winners Consulting specializes in VIKOR for Taiwan enterprises, delivering compliant management systems within 90 days. Free consultation: https://winners.com.tw/contact