risk management 101 awaereness training .pptx

risk management 101 awaereness training

1. Risk Management 101 What is Risk Management? Why Should You Care? What Should You be Doing?

2. What Is Risk? There are many, even conflicting, terms and definitions of Risk: danger possibility peril chance exposure jeopardy consequence hazard menace threat gamble OPPORTUNITY

3. Why Should You Care? Everyone faces risks Risks are everywhere Even when recognized, risks are often poorly understood Bad – even catastrophic – things happen when Risks are not managed!

4. Why Are Risks Misunderstood? We easily succumb to selective validation—the tendency to remember only positive correlations and forget the far more numerous misses. A common ploy used by psychics (often called the Jeanne Dixon effect ) is to make dozens of predictions to increase the odds that one will hit. When one comes true, the psychic counts on us to conveniently forget the 99% that were way off. In investing -- and gambling -- most people remember their big win, and forget the many losses that more than offset it Potentially bad outcomes are weighted much more heavily than mildly bad ones – even when the likelihoods are very different

5. Personal Risk Assessment Mile-for-mile and trip-for-trip air travel is at least 1,000 times safer than driving …

6. Personal Risk Assessment 2 … but an air crash seems much more likely to be fatal.

7. Managing Risks Regardless of definitions, there are 3 agreed steps to manage risks: Identify potential risks Assess/measure the threat Eliminate, mitigate, transfer or accept

8. Basic Risk Management Process Identify Risks and exposures Evaluate loss potential and probability Select & Implement Management Method

9. IDENTIFYING RISKS Some People are Lucky

10. Some People Not So Much

11. Poo Happens!

12. Assessing Risks Few people understand either the probability of an event or the consequences So … most people either underestimate the likelihood of improbable events … Or they overestimate the consequences of everyday risks …

13. What Is The Likelihood?

14. What Is The Consequence?

15. Humans have a poor innate grasp of probability For example, what are the odds of two people sharing the same birthday in a room containing twenty three people? Many think it must be one in thirty or more. Surprisingly to most people, it is only one in two. There's a 100 percent chance of an earthquake today somewhere in the world!

16. Few understand the laws regarding truly large numbers. Many people believe in the Gambler's Fallacy , thinking that if a tossed coin ends up “tails” an inordinate number of times in 100 trials, then “heads” is bound to come up more often in 100 subsequent trials to “even up” the score and return to a 50-50 distribution. But – the odds of tossing “tails” is still 50% each time; the coin has no “memory” of what happened previously. A widely accepted law of statistics states that with a large enough sample size, even the extremely unlikely becomes probable, and therefore any outrageous thing is bound to happen eventually – even 100 “tails” in a row!

17. Are You Safe? Our sense of "safe" is often distorted by media coverage (or the lack of it) and distance: The disappearance of Natalee Holloway gained worldwide attention and caused a sharp decline in visitors to Aruba, even though it is the safest island in the Caribbean – fewer than 1 murder annually. Your chances of being a victim of foul play are considerably greater in Las Vegas (more than 1,000 murders annually) than Aruba, yet no one is canceling their trip to Las Vegas because of safety. Health issues and terrorism grab the headlines but crime and accidents pose far greater risks for travelers . In 2003 48 people died of SARS in Toronto and all of those deaths were connected to hospitals. But fear caused hotel occupancy rates to plummet from 87% to 13%. 80 people died in traffic accidents in Toronto in 2003; but, once again, no one cancelled a Toronto trip for fear of dying in a traffic accident .

18. Road Trip Risks What we think…. The usual reality..

19. Some Probabilities of Mortality Die from Heart Disease 1 in 280 Die of Cancer 1 in 500 Die in Car wreck 1 in 6,000 Die by Homicide 1 in 10,000 Die of AIDS 1 in 11,000 Die of Tuberculosis 1 in 200,000 Killed by lightning 1 in 1.4 million Killed by flood or tornado 1 in 2 million Killed in Hurricane 1 in 6 million Die in commercial plane crash 1 in 10 million You are at least 1,000 times more likely to be killed on the way to the airport than to die during the flight

20. Ineffective Risk Management

21. The Banks Still Haven’t Figured It Out After the “meltdown” of 2008, a reasonable person might assume that surviving banks and brokerages would institute better risk management procedures and controls. Far from it! Within the past 2 years … UBS wrote off at least $5 Billion of losses from mortgage-related debt and derivatives after 2008 AND was stung for another $2+ Billion by a junior trader who successfully concealed his bad trades for more than 2 years.

22. And Still Haven’t … MF Global, the third largest commodity broker/dealer in the U.S., filed for bankruptcy as a result of excessive bets on Euro Zone Sovereign bonds. $593M of customer funds were apparently illegally co-mingled with the firm’s funds and were officially “missing”. The bankruptcy is expected to be the 8 th largest in U.S. history.

23. What Should You be Doing? Investigate! Read the fine print! Identify and accurately assess the risks in critical or stressful situations. You are about 10,000 times more likely to have your car stolen, than to win a lottery

24. And … Be Skeptical! Get it in writing If you don’t understand an investment or transaction, don’t make it until you do. Insure against catastrophe.

25. Failure to understand and act appropriately can be very costly! Knowledge is protection!

26. Answer These Key Questions

27. Why Are You Doing Whatever It Is?

28. Are You In The Right Place?

29. At The Right Time?

30. With The Right Tools?

31. To Avoid Disaster?

32. Or Not?

33. Risk Management

34. Risk……!!!!

35. According PMI : “ An uncertain event or condition that, if it occurs, has a positive or negative effect on a project’s objectives ”. Characteristics of risk: Uncertainty – the risk may or may not happen, that is, there are no 100% risks Loss – the risk becomes a reality and unwanted consequences or losses occur Risk……!!!!

36. Risk Management

37. Risk Management Risk management is identification assessment, monitor, and control the probability impact of unfortunate events to maximize the realization of opportunities

38. Risk Management process groups

39. Risk Management Process Groups Plan Risk Management Identify Risks Perform Qualitative Risk Analysis Perform Quantitative Risk Analysis Plan Responses Control Risks

40. Plan Risk Management Planning process with the risk management plan as its sole output Understand the general level of risks your project faces Project team or organizational tolerance for risk Domain Tasks: Identifying, analyzing Defining risk response strategies To manage uncertainty throughout the project life cycle

41. Plan Risk Management input Project Management Plan process: Project charter Stakeholder register Enterprise environmental factors Organizational process assets Tools and techniques analytical techniques Expert judgment Meetings

42. Plan Risk Management output Risk management plan: The particular risk methodology and approach to be taken on the project The individual roles and responsibilities within the team and the wider group of stakeholders Any approved budgets for managing risk, which should then be included in the cost performance baseline An initial analysis of the individual risk categories using a risk breakdown structure

43. Breakdown structure

44. Identify Risks Uses a wide variety of inputs and tools and techniques to identify all the risks to the project Performed Through the life of the project The risk register is always updated with newly identified risks current risks that are reassessed by using the other risk planning processes

45. Identify Risks inputs Risk management plan Cost management plan Schedule management plan Quality management plan Human resource management plan Scope baseline Activity cost estimates Activity duration estimates

46. Identify Risks inputs Stakeholder register Project documents Procurement documents Enterprise environmental factors Organizational process assets Tools and techniques Documentation reviews Information-gathering techniques Checklist analysis assumptions analysis Diagramming techniques SWOT analysis Expert judgment

47. Identify Risks outputs Risk register: risk register is highly iterative risk register itself should be treated as a live document and reviewed regularly reviewed at all levels risk register will take many forms depending on your organizational risk tolerance and any existing templates and guidelines

48. Perform Qualitative Risk Analysis Focused on assigning a qualitative subjective analysis of probability impact to all identified risks done on all identified risks quick and easy

49. Perform Qualitative Risk Analysis inputs Risk management plan Scope baseline Risk register Enterprise environmental factors Organizational process assets Tools and techniques

50. Perform Qualitative Risk Analysis inputs Tools and techniques: risk probability and impact assessment Probability and impact matrix risk data quality assessment risk categorization risk urgency assessment Expert judgment

51. Perform Qualitative Risk Analysis outputs Project documents updates: Risk Register Assumptions Log

52. Perform Quantitative Risk Analysis Focused: development of a quantitative objective assessment of individual risk probability impact by using a metric based on money or time

53. Perform Quantitative Risk Analysis

54. Perform Quantitative Risk Analysis inputs

55. Perform Quantitative Risk Analysis inputs Tools and techniques Data gathering and representation techniques Quantitative risk analysis and modeling techniques Sensitivity analysis Tornado diagrams Expected monetary value analysis (EMV) Modeling and simulation Expert judgment

56. Perform Quantitative Risk Analysis outputs Project documents updates: updated the risk register includes quantitative probabilities of individual risks quantitative impacts of individual risks in terms of both cost and time subsequently a prioritized list of quantified risks.

57. Qualitative Risk Analysis vs Quantitative Risk Analysis Qualitative: risk-level Quantitative: project-level Qualitative: subjective evaluation of probability and impact Quantitative: probabilistic estimates of time and cost Qualitative: quick and easy to perform Quantitative: time consuming Qualitative: no special software or tools required Quantitative: may require specialized tools

58. Plan Risk Responses Focused on the development of proactive responses to risks Minimizing the potential effects of negative risk Maximizing the potential benefits of positive risk on a project Considers responses to unplanned or unforeseen risks

59. Plan Responses

60. Plan Responses inputs risk management plan risk register Tools and techniques Strategies for negative risks or threats Strategies for positive risks or opportunities Contingent response strategies

61. Plan Responses outputs Project management plan updates Project documents updates revisit these foundational documents Project documents updates updated the risk register and the assumptions log

62. Focused on monitoring and controlling the project Accordance with the risk management plan and the information contained within the risk register Control Risks process checks the implementation of the plan Like other monitoring and controlling processes looking out for any variance between what risks you had planned and what risks are occurring New risks, and any new information affecting already identified risks, and evaluating the overall risk process

63. Control Risks inputs Project management plan risk register Work performance data Work performance reports Tools and techniques risk reassessment risk audits Variance and trend analysis Technical performance measurement reserve analysis Status meetings

64. Outputs Work performance information Change requests Project management plan updates Project documents updates Organizational process assets updates

65. Risk Risk management Risk Management process groups Plan Risk Management Identify Risks Perform Qualitative Risk Analysis Perform Quantitative Risk Analysis Plan Responses Control Risks