Quality & Business Improvement

Risk Management

working out what can go wrong tomorrow ... and doing something about it today

Risk Management

Aims of Good Risk Management

Identify and mitigate the effects of any single risk, combined risks and cumulative risks which could cause the project to fail.

The main benefit of risk management is the replacement of expensive fire-fighting and crisis management activities with more focused, cost-effective preventative approaches.

Methods used for Risk Management

BRAINSTORMING Use an experienced facilitator, though not necessarily experienced in the field being assessed. Provide a forum which allows open and honest discussion. Involve a good range of cross-functional team members.

CHECKLISTS Provide a list of areas where risks may lie. Be careful not to limit yourself to checklists - make sure you keep an open mind about other areas.

NEAR NEIGHBOUR COMPARISON Compare with similar projects to learn from their risks.

ANALYSIS Analyse which of your assumptions may be wrong. Decide which risks wll exist if the schedule is not met. Look at activities at/near the critical path.

EXPERT ADVICE Look for people who have experience in the field.

Answers to Risky Questions

Who does risk management? EVERYONE. No exceptions. You mightn't call it risk management, but you still do it.

What risks will stop us achieving our project objectives? Use the most suitable method for identifying risks and involve all team members to ensure ownership of results. Differentiate between the causes of risks and their impact - a single risk can have many impacts. Focus on identifying causes of risks. Since many risks are within supply chains, pass the risk information to suppliers and, of course, make sure the proejct team is aware of all risks as soon as possible. Remember that new risks will occur as the project progresses, so risk identification tasks will occur regularly.

What risks can we afford to take on? There must always be senior management approval for risk reduction strategy, especially for budgets. The contingency budget must be held separately. It is very important to review the projects regularly for overall viability, especially during the bid phase.

What do we do if the risks actually occur? Prepare contingency plans for any risk which cannot be mitigated immediately. It's vital to have plans prepared before the risk occurs (or else to be very quick on your feet when it does). Identify the trigger at which the contingency plan should be implemtned (this could be cost, schedule or performance driven).

Further Reading

  Against the Gods: The Remarkable Story of Risk
Peter L. Bernstein

ISBN: 0471121045, Hardcover - £13.99 BUY
ISBN: 0471295639, Paperback - £8.96 BUY

This makes an already fascinating subject readable - it's a way of painlessly absorbing risk management knowledge and a good background text.
  Managing Operational Risk: 20 Firm-wide Best Practice Strategies
Douglas G. Hoffman

ISBN: 0471412686, Hardcover - £44.07 BUY

This concentrates on financial institutions, which is perhaps its only drawback.

© Fell Services Ltd., 2004

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