risk management - acoste
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Risk Management - ACostE. Kate Boothroyd FIRM Director, KB Risk Consulting Limited. What does the IRM do exactly?. Provide education and training for professionals in risk management. Provide a professional support network for those working in risk management. - PowerPoint PPT PresentationTRANSCRIPT
Risk Management - ACostE
Kate Boothroyd FIRMDirector, KB Risk Consulting Limited
Provide education and training for professionals in risk management
Promote technical and ethical good practice in risk management
Provide a professional support network for those working in risk management
What does the IRM do exactly?
2700 members worldwide
IRM – Levels of Membership
Member
Specialist Member
Certificant Member
Affiliate
FIRM
SIRM
CIRM
Fellow
MIRM
What is risk and risk management?
• Risk can be defined as the combination of the probability of an event and its consequences
(ISO/IEC Guide 73)• In all types of undertaking, there is the potential for events
and consequences that constitute opportunities for benefit (upside) or threats to success (downside).
• Risk Management is increasingly recognised as being concerned with both positive and negative aspects of risk.
(IRM Risk Standard 2002)
The Risk Management Process
7
Why Is It Used?
• Key tool towards delivering your business/project objectives successfully
• Greater awareness of the key risks – fewer surprises• Intelligent allocation of risk• Aid decision making process• Common sense• Changing market • Mandatory procedures• Corporate governance - Stock Exchange Listing Rules / good
business practice
What is most of interest to ACostE?
• Not just identification of risks – both threats and opportunities• Better understanding of objectives – what’s important• Planning for risk management so appropriate resources and
approach in place• Assessment
– Qualitative– Quantitative - cost and time modelling through life
• Responses appropriately accounted for• Monitoring and reviewing – end life forecasting
Qualitative assessment
Consider both threat and opportunity
Threats
Very High
High
Medium
Low
Very Low
Impact/Threats
1 2 3 4 5
Impact/Opportunities
5
4
3
2
1
-5 -4 -3 -2 -1
Pro
ba
bil
ity
Very High
High
Medium
Low
Very Low
Opportunities
Quantitative assessment
• Aims to:• Quantify the effect of risks• Predict likely project outcomes• Identify options
• how to respond• Balance response against potential cost• Focus management attention
• priority areas
Contingency is usually arrived from the combination of the following two forms: -
– Estimating Uncertainty: uncertainty associated with possible performance for project or operational work scope in terms of cost and schedule duration.
– Discrete risk: an event, circumstance or condition that may or may not occur, which could influence delivery of project or operational work scope
Contingency
Draw Up Base Programme and Estimate• Establish the base programme and estimate before risk
assessment• All impact assessments must reflect the current baseline
• Assumptions, exclusions, allowances• Constraints
• Note that part of a risk may already be covered within a base estimate or programme
• Response strategies / mitigation actions must be reflected in the base plan – this provides funding for risks should they impact.
• Must map discrete risks across correctly to the base plan – not all risks span all phases
• If this is not done correctly in development of the proposal then funding for the Project will be incorrect
Caveats
• May not be required, appropriate or affordable• Most useful when most difficult• Difficulty in estimating uncertainty• Wags and swags• Not all risks need to be priced in a contingency - probably 80%
can be managed, often by processes that are already in place• Risk management is NOT there to price you out of every project• It should give you the information to help you decide:
• How much to include to pay for the risks you are expected to take
• How much to include in the base plan for management actions
• Whether you want to submit a proposal for the job at all!
Summary
• Recognise the need to ensure that it is fit for purpose• Recognise some of the peculiarities in implementation in different
industries• Remember that it is one tool of many in the management toolbox• Understand that risk management isn’t there to price you out of
every project• Ensure the right people have been involved in the process• Ensure the process has been handed over properly at each stage• Ensure the process is resourced properly from start to finish• Remember that risk management is there to help you make better
decisions, so ensure you use it in the decision making process• Remember that if the process is paid lip service to, it will fail!