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4.1 Strategic Risk Management Important - Coggle Diagram
4.1
Strategic Risk Management
Important
Managing risks is important for:
To ensure the project is viable, and, if viable, that there is a feasible method for completion
Part of a project manager’s role involves identifying, assessing and mitigating risks associated with
Risk in project management is "
the potential for adverse effects or outcomes – usually related to the project’s schedule, cost and quality
"
Strategic risk would refer to something endangering the realisation of the strategic objectives.
Features of
Risk Management Process (cycle)
Lecture
Prof. Nigel Smith
Risk Identification
Risk Assessment
Risk Response (mitigation method)
Risk Transfer
Risk Reduction
Risk Elimination
Risk Retention
Risk Identification
Identify as many potential risks as possible to eliminate the trivial ones
Tools to identify risks
Brainstorming
Checklists of similar historic projects
Case histories of older projects of external organisations
Consult a number of experts in the field (Delphi analysis)
Breaking the project down into sections
Global Risks
Legal
Environmental
Political
Commercial
Elemental Risks
Operational
Financial
Technical
Revenue
Risk Assessment
Probability-/impact Grid (Risk Matrix)
Risk Assessment Methods
Sensitivity
Critical path network model
Financial spreadsheet model
Changes are made and effects recorded, hence, it is called
sensitive analysis
Probabilistic
Monte Carlo analysis
Elemental
Risk Response
Risk transfer
Risk reduction (mitigation)
Risk elimination (avoid)
Risk retention (accept)
What is Uncertainty?
Uncertainty is the overarching term for:
Risk as an adverse probable outcome
Opportunity as a positive probable outcome
Uncertainty management:
Identify relevant uncertainty areas.
Identify possible negative outcomes (risk).
Mitigate.
Identify possible positive outcomes (opportunities).
Enhance.
Establish Uncertainty Management Process.
Collingridge’s Dilemma
in a new (uncertain/unknown) system, it is easy to make a change, but you need time before the outcome of that change is clear
However, by the time you understand the outcome, it may be too late and/or too expensive to change the system again.
Addressing Uncertainty
intelligence
To gather intelligence effectively, you need to have a specific purpose and the information collected has to be formally collated, evaluated and analysed.
The importance of strategic risk management regulation
What are risk registers?
The levels with in a typical organisation include:
Strategic/corporate (Portfolio)
Business unit (Tactical/Bundle)
Project (Operational).
The risk register’s first function is to record risks and to give them an identity (a number or code) so that you can refer to them easily in correspondence and discussion.
A a heat or traffic light system is used to counter lengthy and detailed risk registers. This involves classifying risks according to the level of the organisation responsible for them
Amber & orange - indicates risks at the Business Unit or Group level
Green - indicates risks which can be managed at Project/Operation level.
Red – indicates risks which need to be addressed at Main Board level
The severity of the risks identified is typically rated as follows:
Negligible impact.
Significant impact.
Serious impact.
Threat to future trading.
Threat to business survival.
The likelihood of risks occurring is typically rated using the following system:
Improbable <1%
Remote >1% - <10%
Possible >10% - <50%
Probable >50% - <90%
Certain >90% - 100%.
It is key to remember that risk is continuous and dynamic but you must adopt one risk management system over the whole life cycle of a project.