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Risk Management

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Dan Zell

on 6 November 2013

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Transcript of Risk Management

Risk Management for Construction at National Water Company
Definitions
"Examine what is said, not him who speaks." -- Arabian Proverb
Implementing Risk Management
Understanding Risk
Identifying Risks
"Ask the experienced rather than the learned." -- Arabian Proverb
Treating Risks
"All courses of action are risky, so prudence is not in avoiding danger (it’s impossible), but calculating risk and acting decisively. Make mistakes of ambition and not mistakes of sloth. Develop the strength to do bold things, not the strength to suffer."Niccolo Machiavelli, The Prince
Analyzing Risks
Qualitative Risk Analysis vs. Quantitative Risk Analysis
Barriers to Risk Management
Lack of team member commitment
Lack of knowledge of Risk Management
Differing priorities, interests and judgements of team members
Communication problems
Unclear project objectives
Role conflicts
Why Manage Risk?
“Fail to Plan, Plan to Fail”
Is this your style?

Vs.

“Think, Plan, Do”
Planning for Success

Risk
“Effect of uncertainty on objectives

An effect is a deviation from the expected – positive and/or negative”

Section 1.1, ISO Guide 73:2009;
Risk Management — Vocabulary

Threat
A THREAT is ‘an uncertain event or set of circumstances that should it occur, will have a NEGATIVE effect on the business’s objectives’;

Opportunity
An OPPORTUNITY is ‘an uncertain event or set of circumstances that should it occur, will have a POSITIVE effect on the business’s objectives’.

Issue
An ISSUE is a problem that currently affects the business that is being dealt with through ongoing management activities –

Note: issues are not risks!

Likelihood
LIKELIHOOD – the chance of something happening
Often expressed as a %
Probability – often used as alternative phrase
Likelihood preferred term as it translates more accurately into other languages

Consequence
Consequence – outcome of an event, often expressed as Impact
Risk Management
The identification measurement and control at the most economic cost, of the hazards which can threaten life, property and the assets and earnings of an organisation
All projects contain Risk!
No Risk, no reward
Scoring Risks
Probability and Scoring
Qualitative Risk Analysis
This consists of using the probability and impact matrix tool (risk matrix) to prioritize and rank the risks contained in the risk register. By doing this, you are able to focus your management time and effort on the most important risk areas.

Quantitative Risk Analysis
Quantifying is assigning a value to the ranked risks usually terms of time or cost.
“As a result of a definite cause, an uncertain event (or risk)
may occur, which would lead to effect on our objectives”

“Every model is wrong,
but some are useful.” George Box
Treating Risks
Risk Mitigation vs Risk Transfer
Risk Control Actions
Choose Response strategy…then actions to implement it

Look for general responses – they offer some level of a solution to a wide range of risks and are key in adding in flexibility
Order responses
Combinations or multiple responses may be required
Check responses are not incompatible / mutually exclusive or affect other works adversely
Look for secondary risks arising from the responses
Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities.
Why Manage Risk (continued)?
PROACTIVE: Early intervention, preparation, plan and implement systems & processes
VERSUS:
REACTIVE: Late intervention, problems unforeseen which increase delays & costs
Why Manage Risk? (continued)
Purpose of Project Risk Management is to improve project performance via systematic identification appraisal and management of project related risk
Risk Management is a “Process NOT an Event!”
The project team should update the risk register, the risk ranking and where necessary, recalculate the risk contingency value.

Risk Register
A risk register displays identified risks in a structured format
It is a ‘live’ document
It helps ensure:
Comprehensive risk identification, description and assessment
Risks are assigned/owned
Solutions to reduce risks are implemented
Risk Control Actions
Look for general responses – they offer some level of a solution to a wide range of risks and are key in adding in flexibility
Combinations or multiple responses may be required
Check responses are not incompatible / mutually exclusive or affect other works adversely
Look for secondary risks arising from the responses
Risk Control Actions (cont)
Purpose:
Determine which risks and responses the Client wishes to own and manage and those others own and manage
Allocate responsibility for managing each risk and response
Approval of response plans controlled by others

Deliverables:
Clear ownership for each risk
Clear responsibility for management of each risk
Timescales for action

Accept a Risk?
Often used when the risk is or has reduced to an acceptable level

Risk Score usually very low OR
An opportunity that has unexpectedly arisen.
Earned Value Management
Earned value management is a project management technique for measuring project performance and progress.
It is able to provide accurate forecasts of project performance problems
Full transcript