Definition: Risk Management

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  • Created by: Annagc
  • Created on: 27-03-24 13:14
What is risk management?
'Risk management is a process that allows individual risk events and overall risk to be understood and managed proactively, optimising success by minimising threats and maximising opportunities.'
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What four factors make up the risk context?
The external environment, industry sector, stakeholders, the organisation's risk attitude
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What are the three types of risk attitude?
Risk averse, risk neutral, risk seeking
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Project risk and analysis management (PRAM) Phase 1: Initiate
Define the project - objectives, scope, constraints are fully understood so an effective risk management process can be outlined
Focus the risk management process - the plan will be influenced by project size, complexity and strategic importance which wi
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What is risk attitude?
'the perception driven choice of a person or group about individual risk, or overall riskiness of a project, programme or portfolio.'
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What is risk appetite?
'the amount of risk that investors are willing to tolerate in achieving their objectives. This is expressed as risk thresholds or tolerances. This in turn will help in the prioritisation of identified risks and used to highlight an unacceptable level of r
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What should be documented in the risk register?
The description of each risk
Probability and impact ratings
The details of risk response
The owner of each risk (the best person to manage the individual risk)
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Project risk and analysis management (PRAM): Phase 2 - Identify

What is assumptions analysis and it's strength and weakness?
Analyses the level of confidence of the assumption and the level of sensitivity (i.e. the level of impact) on project objectives if the assumption is not correct.
S) Ensures stakeholders have an understanding of each factor and recognises that assumptions
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Project risk and analysis management (PRAM): Phase 2 - Identify

What is constraints analysis and it's strengths and weakness?
Constraints are reviewed to consider whether the constraint introduces risk to the project
S) Can be a good source of identifying opportunities - what might happen if a constraint was relaxed?
W) If a constraint cannot be changed it may be assumed that no
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Project risk and analysis management (PRAM): Phase 2 - Identify

What are checklists and it's strength and weaknesses?
Risks are identified based on criteria derived from previous projects or other standard approaches
S) Makes full use of lessons learned and experience to prevent repetition of risks materialising
W) Looks back at previous projects and may miss 'this' proj
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Project risk and analysis management (PRAM): Phase 2 - Identify
What are prompt lists and it's strength and weakness?
Generic headings to stimulate thought across a breadth of areas (may use a risk breakdown structure)
S) Ensures that the team think laterally about multiple areas that may impact the project. Helps to identify clusters of risk of the same heading which is
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Project risk and analysis management (PRAM): Phase 2 - Identify
What are brainstorm workshops and it's strength and weakness?
Group session engages attendees from a range of disciplines to utilise their experience
S) Quick and generates multiple ideas and participation
W) Can be biased by a limited number or more assertive participants and can also be difficult to control
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Project risk and analysis management (PRAM): Phase 2 - Identify
What are interviews and strength and weakness?
Structured discussions of project risks when it may not be suitable to have a group meeting
S)May be more appropriate for sensitive issues and allows for more in-depth discussion. A 'Delphi' approach can be used to independently consult with different par
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Project risk and analysis management (PRAM): Phase 2 - Identify
What is SWOT and strengths and weakness?
Identification of the project's strength, weaknesses, opportunities and threats
S) Ensures a balanced approach to the definition of positive and negative risks
W) Has a tendency to over-simplify the situation by classifying each factor into a category whe
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Project risk and analysis management (PRAM):
Phase 3 - Assess
Risks should be qualitatively assessed to determine the probability of each risk occurring and the possible impact on any project objectives (time, cost, quality, safety) should it occur.
The risks can be plotted on a probability-impact grid (some orgs. m
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Project risk and analysis management (PRAM):
Phase 4 - Plan responses
Proactive and reactive responses
P) a response which is planned to address the impact and/or likelihood of risk occurring, plans the actions that will be carried out by the risk owners within an appropriate timeframe.
R) The risk has to be accepted for the time being, but if a linked eve
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Risk responses: Threats - Avoid
Avoid threats by eliminating the cause e.g. remove a work package or stop the project
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Risk responses: Threats - Transfer
The responsibility for bearing the impact of a threat is passed to another party (commonly used to transfer financial impact e.g. insurance or penalty clause)
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Risk responses: Threats - Reduce
An investment of effort or budget to mitigate the probability and/or impact of a specific threat
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Risk responses: Threats - Accept
Passive acceptance means nothing will/can be done
Active acceptance means nothing is being done now but there is a contingency plan ready if the risk should occur
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Risk responses: Opportunities - Exploit
The scope is changed to ensure that the opportunity definitely happens
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Risk responses: Opportunities - Share
Some or all of the opportunity is allocated to another party who is best able to realise the benefits
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Risk responses: Opportunities - Enhance
The probability and/or impact is increased by some form of proactive measure e.g. adjusting a plan
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Risk responses: Opportunities - Reject
Reject the opportunity because the benefits are not significant enough to warrant action
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What is contingency?
Resource set aside for responding to identified risks, it matched the gap between the 'un-risked' plan and the desired level of confidence. It is most often monetary value and/or time
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Project risk and analysis management (PRAM):
Stage 5 - Implement
The PM must ensure that risk response is undertaken and achieves the desired outcome. The risk owners should be accountable for the mitigation of risks allocated to them.
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What is residual risk?
The risks that are expected to remain after the planned response has been taken, as well as those that have been deliberately accepted
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Risk management benefit: Discourages acceptance of financially unsound projects
Helps identify risk exposure which enables more realistic decisions and might lead to cost savings when a project is unlikely to meet objectives
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Risk management benefit: More credible plans, schedules and budgets
Identifying risks, responses and allocating suitable contingency helps to define effective delivery strategy and therefore more realistic budgets and schedules are developed
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Risk management benefit: Leads to the use of the most suitable type of contract
Helps to indicate which contractual relationship and payment terms are most suitable. Risk management also helps identify areas of potential conflict between the client and contractor.
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Risk management benefit: Identifies and allocates responsibility to the best risk owner
The allocation of a single risk owner provides assurance that the risk will be responded to in the most appropriate manner. It also helps to remove ambiguity as to where ownership lies.
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Risk management benefit: Demonstrates professional and responsible approach to stakeholders
Sharing information on risk leads to improved understanding and stronger relationships between the project team and senior management, customers, contractors etc. Formal risk management provides stakeholders with confidence that the project is being manag
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Card 2

Front

What four factors make up the risk context?

Back

The external environment, industry sector, stakeholders, the organisation's risk attitude

Card 3

Front

What are the three types of risk attitude?

Back

Preview of the front of card 3

Card 4

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Project risk and analysis management (PRAM) Phase 1: Initiate

Back

Preview of the front of card 4

Card 5

Front

What is risk attitude?

Back

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