Unit 3 University of Sunderland COMM80 Risk Assessment of Systems Change Introduction to Risk: Concepts, Assessment and Management COMM80: Risk Assessment of Systems Change Unit 3

University of Sunderland COMM80 Risk Assessment of Systems Change Objectives of Unit 3 To understand the definitions of risk and their implications To be aware of the generic framework for risk assessment and management. To appreciate the importance of context in risk assessment and management.

Unit 3 University of Sunderland COMM80 Risk Assessment of Systems ChangeOverview Definitions Risk or Problem: Is Risk Negative? Assessment of Risk and the Impact of Time. Types and Classifications of Risks Classifications of Evaluation of Risks Perception of, and Attitude to, Risk Dealing with Risk (Risk Management) The Generic Risk Management Approach

Unit 3 University of Sunderland COMM80 Risk Assessment of Systems Change Dictionary Definitions The possibility of incurring misfortune or loss" "Chance of a loss or other event on which a claim may be filed” The possibility of suffering loss, injury, disadvantage or destruction Chance, danger, gamble, hazard, jeopardy, peril, possibility, speculation, uncertainty, venture.

Unit 3 University of Sunderland COMM80 Risk Assessment of Systems Change Technical Definitions The possibility of suffering loss: for risk to be understandable it must be expressed clearly. Such a statement must include –A description of the current conditions that may lead to the loss –A description of the loss. (SEI Statement of Risk, Higuera et al 1994).

Unit 3 University of Sunderland COMM80 Risk Assessment of Systems Change Technical Definitions The possibility of loss, the loss itself or any characteristic, object or action that is associated with that possibility. –A loss is defined as an outcome that falls short of what was expected. “Expectations” are held/defined by stakeholders. –(Risk in the RISKIT method, Kontio 1997).

Unit 3 University of Sunderland COMM80 Risk Assessment of Systems Change Risk or Problem Risk is inextricably linked with time (particularly the future). –Focus: determining the likelihood, cost/benefit of the outcomes of “what-if scenarios”. –Focus: uncertainty and decision analysis, based on existing data of past experiences, expectations and (often) prejudices. –As soon as an outcome is reached in a risk scenario the risk ceases to be an issue. But the outcome is either positive or negative.

Unit 3 University of Sunderland COMM80 Risk Assessment of Systems Change Risk Definition In any particular context each risk needs to be defined. –The components that need to be assessed in order to estimate the overall risk need to be clearly identified and understood, –The measures that can be taken for the components need to be identified so that the risk can be monitored and evaluated –Therefore appropriate data needs to be collected at the appropriate time.

Unit 3 University of Sunderland COMM80 Risk Assessment of Systems Change Is Risk Negative? We tend to think of risk as negative - –essentially we’re looking at a decision point and emphasising the negative results. It’s a matter of perspective: –Thinking of changing a system? What can go wrong? - are these risks? What can we gain? Are these risks? –Thinking of staying with a system? How can we best use it? - are these risks? What opportunities might we lose? Are these risks?

Unit 3 University of Sunderland COMM80 Risk Assessment of Systems Change Assessment of Risk and the Impact of Time. Risk = Probability x Impact. But…both the probability and the impact of an event happening can change over time.

Unit 3 University of Sunderland COMM80 Risk Assessment of Systems Change Assessment of Risk and the Impact of Time. Risk assessment relies on the availability of relevant data and information. –Some risks can be readily assessed, others can’t, –but the risk assessment must always be “timely”.

Unit 3 University of Sunderland COMM80 Risk Assessment of Systems Change Types and Classifications of Risks Risk are not homogenous: they can be classified/ categorised: Existing lists and taxonomies of risks can help during projects in identifying risks and assessing them. –May be classified in different ways: for instance Cause of the risk. Consequence of the risk. These classifications are not always totally independent,

Unit 3 University of Sunderland COMM80 Risk Assessment of Systems Change Evaluation of Risks In any situation the evaluation of a risk can be made with: Certainty Probabilistic imprecision Probabilistic uncertainty Information imperfection Conflict potential order of increasing management difficulty

Unit 3 University of Sunderland COMM80 Risk Assessment of Systems Change Risk Perception and Attitude In assessing (and even identifying risks) people’s preconceptions and prejudices come into play. –In different groups the reaction to a risk-laden scenario can vary, with entrepreneurs keen to exploit opportunities and others looking to minimise their exposure to risk. –The reaction may vary depending upon: the amount at stake, the context of the risk and the time horizon.

Unit 3 University of Sunderland COMM80 Risk Assessment of Systems Change Dealing with Risk (Risk Management) The options available include –Proactive risk management. –Interactive risk management. –Reactive risk management. –Inactive risk management. Most risk management approaches are developed to help those who have an interactive risk management approach. Decreasing control

Unit 3 University of Sunderland COMM80 Risk Assessment of Systems Change Generic Framework of Risk Assessment and Management