Risk Management - The Vital Key to Success (Adrian Lovel-Hall)

On International Project Management Day ( 3rd November 2011), the Project Management Institute of Zimbabwe invited PM.Ideas to present at their inaugural PM conference in Harare. The theme was "Project Management - the Power of the Profession" and was attended by approximately 100 people, including ...

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Risk Management - The Vital Key to Success (Adrian Lovel-Hall)

| Friday, 6 January 2012

On International Project Management Day ( 3rd November 2011), the Project Management Institute of Zimbabwe invited PM.Ideas to present at their inaugural PM conference in Harare. The theme was "Project Management - the Power of the Profession" and was attended by approximately 100 people, including Zimbabwe‘s 4 PMP® graduates. The following paper was delivered by Adrian Lovel-Hall at the conference, and rings true for projects and programs globally.

Risk management, commonly viewed as negative or reactive, is actually a positive and proactive management technique. For all of us, we deal with risk on a daily basis - be it at home, family, work and the environment.

A risk, when identified creates a number of responses for groups and for individuals. Reactions can be extreme, leading to bad, wrong or even fatal decisions. When not dealt with effectively and proactively, the initial and often lingering effects could have an untold impact on the individual, and in turn their lives, families, friends and work. It is when we understand risk as an opportunity or threat, and create a response and reduce the impact if it occurs, we will embrace the situation proactively.

David Hillson, the Risk Doctor The Risk Doctor , has defined risk as having one or more causes, which will create a possible event, resulting in one or more effects on deliverables. All risks need to be identified against what we have planned to do. Should the cause create multiple events, then there is a need to manage more risks.

Organisations face risk at all levels. Let‘s have a look at couple of examples:

  • During the initiating stages of a strategy development and strategy achievement. These influences will guide the business and Executive to choose the right initiatives for the upcoming fiscal year, through to strategy delivery over a period of time. The types of risks facing an organisation at this level will be against the strategies of the organisation as a whole and the effects on investment and shareholding.
  • Assigning and acceptance of business, program and project initiatives for the ensuing year. These risks will be identified in terms of the Return on Investment, Assets and Resources of the organisation. We can identify these by the high level strategic portfolios which are created. The types of risks facing the organisation at this level will be against specific strategies in terms of the assets and resources available to perform the work and the required return on investment.
  • Benefits realisation delivery and work required within a fiscal year. Also known as Low-Level portfolios, these risks will be identified against the operation of an organisation to deliver the requirements of the current year. Risks in this area will be against the fiscal year in terms of time and budget to perform work.
  • Defining and implementing the relevant scope of work for those initiatives, known as projects and programs, which create the various products, services and results to gain a benefit for the organisation. Risks in this area will be against the scope, time, cost, quality and benefits of the program, and the scope, time, cost and quality of the project‘s product, service or result.
It is important that every person in an organisation understand that it is their responsibility to identify risks against the work which they will perform, and that each cause, risk or effect is understood at the right level within the organisation. It must however be understood that the same cause may create risks in different areas, and in the same way, the effect of a risk in one area may be the cause of a risk in another. Risks must therefore be viewed in the bigger picture of an organisation and its environment.

Once you have identified and analysed a risk, you need to appoint the right person to manage the risk. The sponsor will be accountable for the business risk, whereas the program/project managers will be responsible for the program/project risks. The responsibility will rest with the area where the risk may occur, and must therefore be assigned to the relevant person or persons who can respond to the risk effectively, if the risk occurs.

Once a risk is identified, and the event which might occur can be traced back to the requirements against the objectives, the owner needs to place a response if this risk will in fact materialise. Based on whether the risk will be a positive or negative result, will determine whether an owner will respond to reduce impact, which is to mitigate, avoid, transfer or accept risks or whether they will respond to increase impact as a positive event, which is to enhance, exploit, share or accept risks. The alternative will be to hold on until additional information is available or a trigger event occurs, which will definitely confirm that the risk may occur.

Many organisations still do not take risk management seriously. The importance an organisation places on risk management has a direct relation to its success. It is imperative that the every person working in the organisation understands the risk policy, processes and procedures and applies them to everything that they do and it becomes evident through their behaviours and ability to make sound decisions. Risk Managing the Uncertainty that matters!

 
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