Risks

By: Gregory Monahan

I have defined ‘‘risk’’ as meaning ‘‘uncertainty,’’ and I have proposed that the presence of risk (uncertainty) is evident in the distribution of possible outcomes. I think it is easy to fall into the trap of spending way too long trying to determine a clear definition of each risk associated with an objective. Take, for example, the case where your objective is to increase total revenues by at least 10% over the next year. You could, quite simply, summarize all of the risks you face as ‘‘the probability that we do not increase total revenues by 10% over the next year.’’ Is that sufficient for application of the SOAR process?

In truth, I have included ‘‘risks’’ in my view of the risk universe only because I thought everyone would expect to see it there and that great numbers of readers would rebel if I did not include it. For the application of the SOAR process, I advocate that risks be stated as in the previous example (i.e., the one about increasing total revenues), for three reasons:

1- By simply defining risk as the probability of not obtaining your objective, you maintain your focus on the fundamental concept of the SOAR methodology: You face a distribution of possible outcomes of varying reward and probability.

2- You do not waste time debating possible (and completely academic) definitions of the risks you face.

3- You have a much higher likelihood of identifying all of the possible influential factors—namely drivers and controls—and this is where your focus should be.

read more

Why successful projects need value and riskmanagement?

Value and risk management enables organisations to succeed in the delivery of ambitious projects by defining their desired outcomes and then exercising processes that maximise value and minimise uncertainty. This applies equally to strategy and business change projects as it does to those in the built environment.

A successful outcome requires that the value to the business is maximised through the delivery of a facility that gives them the benefits they need at a price they can afford at the time when they need it and to a quality that fulfils their expectations. It requires that the outcome is clearly defined and communicated to those who deliver
it (the project team). It also requires effective delivery processes that minimise the impact of the unexpected and uncertainties.

Value management provides an effective process to maximise value in line with the owners’ and end users’ requirements, and fulfils the first of these requirements. Risk management fulfils the second requirement as part of effective project management, by providing a process for managing risk. Both processes should be applied on every significant construction project. This does not always happen. This chapter explores why this is and provides arguments for their systematic use.

Read more in: 

*Fundamental of Management "What Is Manager Do? 

*What is supervisor do? 

*Problem Solving and Decision Making 

*Approach to Risk Management  

*Planning

read more

An Approach to Risk Management

By IT ToolBox: 

Risk is defined as the possibility of unsatisfactory outcome. The word 'possibility' implies a probability level; while the word 'unsatisfactory' implies a measure of 'loss' to someone. As a means of comparing risks, for purposes of directing our efforts toward managing them, we use the concept of relative "risk exposure". Risk Exposure is defined by the relationship:

Risk Exposure = Prob (UO)* Loss (UO)

where Prob(UO) is the probability of an unsatisfactory outcome, and Loss(UO)loss to the parties affected if the outcome is unsatisfactory. is the

Concept of Risk Management

Risks are a major influence on the success or failure of a project. They must be managed by applying a conscientious effort to their reduction or elimination. Not all risks need to be eliminated entirely; often it is sufficient to reduce the project's exposure to a level that is acceptable to the project. Risk management costs time and effort, but the rewards can be significant. Without risk management, the danger of failure is magnified.

Approach to Managing Risks to SYSTEM Z.

The XYZ Partners will apply a risk management approach based on the following principles.

a. All team members assist in identifying risks.

b. Each identified risk is assessed in terms of its probability of occurrence and its resulting loss.

c. The risk exposures are calculated and used to prioritize risks.

d. High priority (high exposure) risks will be managed first.

e. All team members assist in suggesting solutions to minimize risks.

f. Individual plans will be developed for the highest priority risks to reduce their exposure.

g. Plans consist of specific actions to be taken by specific individuals within specific time frames.

h. Progress is monitored and adjusted if necessary.

i. As actions are performed, the risk exposure changes, so the priorities continually change.

Methodology for Risk Management.

To implement the preceding approach the XYZ Partners will follow a methodology that is based on a hierarchy of activities and tasks:

a. Defining Risks:

(1) Identifying Risks

(2) Assessing and Prioritizing Risks

b. Managing Risks:

(2) Planning

(3) Acting

(3) Monitoring, Reporting and Adjusting

Relate Article: Fundamental of Management "What Is Manager Do?
What is supervisor do? 
Problem Solving and Decision Making
Planning

read more