Assessing and Managing Risk Toolkit

Risk Management Risk Management is a continuous project activity and needs to be in the plan right through to completion What is Risk? Any potential threat or occurrence which may prevent you from achieving your objectives and goals. A risk is something that might happen or something that has happened Risk Management is about Reducing the risk of the threat materialising Contingency planning in the event that the risk does materialise Being in control, anticipating and confronting reality Is is not Finding excuses of admitting failure

Identifying Project /Organisation Risk Experience + Intuition + Documentation Review = Identified Risks By combining the experience of your team members with a documentation review, you and your team will acquire important insights on the potential risks for your projects.

Understanding External Influence to Reduce Risk (PEST) Political influences include any legal or regulatory constraints or changes that may threaten your project. Government stability, trade regulations, employment and environmental laws, taxation, and wage legislation etc. Economic influences are general or regional trends in economic conditions that can have a negative impact on your project i.e business cycles, money supply, inflation, interest rates, disposable income, unemployment rates, and labor costs. Socio-cultural influences are derived from a society's cultural attitudes, beliefs, values, and lifestyles. Understanding such things as demographics, class structure, education, consumer attitudes, and leisure interests is critical to successful project initiation. Technological influences relate to the rate of innovation in an industry. Advances in technology, new inventions and discoveries can all pose a risk to a project's development.

Prioritising Projects Risks This analysis involves: Calculating project risk scores Risk Score = Probability (% chance of occurrence) × Impact Assigning severity classifications to all possible risk scores Prioritising the identified risks The risks that have the highest priority are those risks classified as having a high severity. Risks coded red are the highest, followed by medium, or yellow, risks, and then low, or green, risks

Prioritising Projects Risks So what does each risk severity classification and colour actually mean? High Risks—Risks with high severity classifications require immediate attention. You will need to either perform a quantitative risk analysis to determine how much each high risk will cost or prepare a contingency plan to mitigate each risk. Medium Risks—Risks with medium severity classifications should be brought to senior management's attention. Whether further action or analysis will be taken depends on your company, your specific project, and the specific risk. Low Risks—Risks with low severity classifications do not require immediate attention. Maintain a Risk Register

What are appropriate risk responses?

Plans and Strategies for dealing with Risk Contingency plans need to do one or all of the following: reduce the likelihood of the risk occurring reduce the likelihood of the risk leading to loss reduce the amount of the loss

Plan and Strategies for dealing with Risk Avoidance: Use an alternate approach that does not have the risk. This mode is not always an option. There are programmes that deliberately involve high risks in the expectation of high gains. However, this is the most effective risk management technique if it can be applied. Control: Controlling risks involves the development of a risk reduction plan and then tracking to the plan. The key aspect is the planning by experienced persons. The plan itself may involve parallel development programmes, etc. Assumption: Simply accepting the risk and proceeding. A word of caution: To gradually let the assumption of a risk take on the aura of a controlled risk is a mental evolution of the kind of wrongly conditioned thinking that led to the Challenger failure. Risk Transfer: An attempt to pass the risk to another programme element. Typically, used in the context of a government agency passing the risks to a contractor.