riskmanagement-170228074706trrrrrrrr.pdf

Risk Management

1. Arranged by: Harold Malamion
RISK MANAGEMENT AND RISK
ANALYSIS

2. If you are never scared or embarrassed or
hurt, it means you never take any chances.

3. Risk Management
“The process involved with identifying,
analyzing, and responding to risk. It includes
maximizing the results of positive risks and
minimizing the consequences of negative
events”

4. What is Risk Analysis?
Risk Analysis is a process that helps you identify and manage
potential problems that could undermine key business
initiatives or projects.
To carry out a Risk Analysis, you must first identify the
possible threats that you face, and then estimate the
likelihood that these threats will materialize.
Risk Analysis can be complex, as you'll need to draw on
detailed information such as project plans, financial data,
security protocols, marketing forecasts, and other relevant
information. However, it's an essential planning tool, and one
that could save time, money, and reputations.

5. When to Use Risk Analysis
Risk analysis is useful in many situations:
When you're planning projects, to help you anticipate and neutralize
possible problems.
When you're deciding whether or not to move forward with a project.
When you're improving safety and managing potential risks in the
workplace.
When you're preparing for events such as equipment or technology
failure, theft, staff sickness, or natural disasters.
When you're planning for changes in your environment, such as
new competitors coming into the market, or changes to government
policy.

6. How to Use Risk Analysis
1.Identify Threats
Human –Illness, death, injury, or other loss of a key individual.
Operational –Disruption to supplies and operations, loss of access
to essential assets, or failures in distribution.
Reputational –Loss of customer or employee confidence, or
damage to market reputation.
Procedural –Failures of accountability, internal systems, or
controls, or from fraud.
Project –Going over budget, taking too long on key tasks, or
experiencing issues with product or service quality.

7. How to Use Risk Analysis
Financial –Business failure, stock market fluctuations, interest rate
changes, or non-availability of funding.
Technical –Advances in technology, or from technical failure.
Natural –Weather, natural disasters, or disease.
Political –Changes in tax, public opinion, government policy, or
foreign influence.
Structural –Dangerous chemicals, poor lighting, falling boxes, or
any situation where staff, products, or technology can be harmed.

8. How to Use Risk Analysis
2. Estimate Risk
Risk Value = Probability of Event x Cost of
Event
As a simple example, imagine that you've identified a risk that your rent
may increase substantially.
You think that there's an 80 percent chance of this happening within
the next year, because your landlord has recently increased rents for
other businesses. If this happens, it will cost your business an extra
$500,000 over the next year.
So the risk value of the rent increase is:
0.80 (Probability of Event) x $500,000 (Cost of Event) = $400,000
(Risk Value)

9. How do we manage risk
Use the six risk management processes
Risk Management Planning
Risk Identification
Qualitative Risk Analysis
Quantitative Risk Analysis
Risk Response Planning
Risk Monitoring and Control

10. Risk Management Planning
Project Scope
Statement
Enterprise
Environmental
Factors
Organizational
Process
Assets
Project
Management
Plan
Risk
Management
Plan
Planning Meetings and
Analysis
Inputs
Outputs
Tools & Techniques
Risk
Management
Planning
Risk
Identificatio
n
Qualitative
Risk
Analysis
Quantitativ
e Risk
Analysis
Risk
Response
Planning
Risk
Monitoring
and Control

11. What is a Risk Management Plan?
Methodology –Approach, tools, & data
Roles & Responsibilities
Budgeting –Resources to be put into
risk management
Timing –When and how often
Risk Categories –Risk Breakdown
Structure (RBS)
Definitions –Risk probabilities and
impact

12. What is a Risk Mgmt Plan (Cont’d)?
Probability and Impact Matrix
Stakeholder tolerances
Reporting formats
Tracking

13. Risk Breakdown Structure
Lists categories and subcategories where risks
may arise
Project
Technical
Limited Design
Time
Specifications
Adherence
Organizational
Funding
Prioritization
Resource
Availability
Project
Management
Estimates
Scheduling
Communication

14. Risk Identification
Project Scope
Statement
Enterprise
Environmental Factors
Organizational
Process Assets
Risk Management
Plan
Risk Register
Documentation Reviews
Information Gathering
Techniques
Checklist Analysis
Assumption analysis
Diagramming techniques
Inputs
Outputs
Tools & Techniques
Risk
Management
Planning
Risk
Identificatio
n
Qualitative
Risk
Analysis
Quantitativ
e Risk
Analysis
Risk
Response
Planning
Risk
Monitoring
and Control
Project
Management Plan

15. Information Gathering Techniques
Brainstorming
Delphi technique
Successive anonymous questionnaires on
project risks with responses summarized for
further analysis
Interviewing
Root cause identification
Strengths, weaknesses, opportunities,
and threats (SWOT) analysis
Scenario analysis

16. Diagramming Techniques
Cause and Effect Diagrams
Also known as Ishikawa or fishbone
Product
Delivered
Late
Bad
Specs
Insufficient
Resources
Inadequate
Time
Project
Prioritization
Testing
Materials
Potential Causes Effect
Personnel

17. Risk Register
List of
Identified risks
Potential responses
Root causes
Updated risk categories (if required)

18. Risk Management Planning
Risk
Management
Plan
Organizational
Process
Assets
Project Scope
Statement
Risk Register
Risk Register
(UPDATED)
Risk probability and impact
statement
Probability and impact
matrix
Risk data quality
assessment
Risk categorization
Risk urgency assessment
Inputs
Outputs
Tools & Techniques
Risk
Management
Planning
Risk
Identificatio
n
Qualitative
Risk
Analysis
Quantitativ
e Risk
Analysis
Risk
Response
Planning
Risk
Monitoring
and Control

19. Methodologies
Probability and Impact Matrix
Based on Failure Modes and Effects Analysis (FMEA)
From 1950’s analysis of military systems

20. Probability and Impact Matrix
Define Probability Scale & Impact Scale
Likelihood
Class
Likelihood of Occurrence
(events/year)
Not Likely (NL)
<0.01% chance of
occurrence
Low (L)
0.01 -0.1% chance of
occurrence
Moderate (M)
0.1 -1% chance of
occurrence
High (H)
1 -10% chance of
occurrence
Expected (E)
>10% chance of
occurrence
Probability Scale
Consequence Health and Safety
Extreme
Fatality or multiple fatalities
expected
High
Severe injury or disability likely;
or some potential for
fatality
Moderate
Lost time or injury likely; or
some potential for serious
injuries; or small risk of
fatality
Low
First aid required; or small risk
of serious injury
Negligible No concern
Impact Scale

21. Probability and Impact
Plots
Rate each risk
on scales then
plot on matrix
Develop
mitigation
technique for
risks above
tolerance

22. Risk Register Update
Add
Probability and Impact Matrix results
Perform quality check on results
Categorize the risks to make them easier to
handle
Perform urgency assessment to determine which
risk need immediate attention

23. Risk Register

24. Quantitative Risk Analysis
Risk Management
Plan
Organizational
Process Assets
Project Scope
Statement
Risk Register
Risk Register
(UPDATED)
Data gathering
Quantitative risk analysis
and modeling
Inputs
Outputs
Tools & Techniques
Risk
Management
Planning
Risk
Identificatio
n
Qualitative
Risk
Analysis
Quantitativ
e Risk
Analysis
Risk
Response
Planning
Risk
Monitoring
and Control
Project
Management Plan
(Schedule & Cost
Plans)

25. Quantitative Risk Analysis
Analyze numerically the probability and
consequence of each risk
Monte Carlo analysis popular
Decision Tree analysis on test
Diagram that describes a decision and
probabilities associated with the choices
Expected Monetary Value Analysis (EMV)

26. Expected Monetary Value (EMV)
Building
CostProbability
Optimistic Outcome$150K 0.2 $30K
Likely Outcome $225K 0.5 $113K
Pessimistic
Outcome
$300K 0.3 $100K
Expected Value$243K

27. Decision Tree Analysis
Build or
Upgrade
Plant
New
Plant
-$120
Upgrade
Plant
-$50
Strong
Demand
Weak
Demand
Strong
Demand
Weak
Demand
65%
$200
35%
$90
65%
$120
35%
$60
$80
-$30
$70
$10
Decision
Definition
Decision
Node
Chance
Node
Net Path
Value
EMV of New Bldg
Node = $41.5!
EMV of Upgrade
Node = $49!

28. Risk Response Planning
Risk Management
Plan
Risk Register
Risk Register
(UPDATED)
Strategies for negative
risks or threats
Strategies for positive risks
or opportunities
Strategy for both threat and
opportunity
Contingent response
strategy
Inputs
Outputs
Tools & Techniques
Risk
Management
Planning
Risk
Identificatio
n
Qualitative
Risk
Analysis
Quantitativ
e Risk
Analysis
Risk
Response
Planning
Risk
Monitoring
and Control
Project
Management Plan
(UPDATE)
Risk-related
contractual
agreements

29. Strategies
Negative Risks (or Threats)
Avoid
Transfer
Mitigate
Acceptance
Positive Risks (or Opportunities)
Exploit
Share
Enhance
Acceptance

30. Risk Monitoring and Control
Approved Change
Requests
Risk Management
Plan
Risk Register
Work Performance
Information
Risk Register
(UPDATED)
Risk reassessment
Risk audits
Variance and trend
analysis
Technical performance
measurement
Reserve analysis
Status meetings
Inputs
OutputsTools & Techniques
Risk
Management
Planning
Risk
Identificatio
n
Qualitative
Risk
Analysis
Quantitativ
e Risk
Analysis
Risk
Response
Planning
Risk
Monitoring
and Control
Performance
Reports
Requested
Changes
Recommended
Corrective Actions
Recommended
Preventive Actions
Org Process Assets
(Update)
Project
Management
Plan (Update)

31. Risk Management Summary
Risk Management Planning –New
Risk ID –Develop categories & types
Risk Qualitative –Probability & Impact Analysis
Risk Quantitative –Decision Tree, EMV, Monte Carlo
Risk Response –Mitigation & contingency plans
Risk Monitoring and Control –Recurring evaluations
Risk
Management
Planning
Risk
Identificatio
n
Qualitative
Risk
Analysis
Quantitativ
e Risk
Analysis
Risk
Response
Planning
Risk
Monitoring
and Control