principles of risk management
DESCRIPTION
A presentation that attempts to strip away the often-unnecessary complexity of most risk management methodologies to focus on five fundamental elements: goals, plans, uncertainties, responses and management.TRANSCRIPT
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PRINCIPLES OF RISK MANAGEMENT
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DisclaimerAny opinions expressed in the following presentation are the author’s and do not reflect those of the Project Management
Institute or its Chapters.
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“If anything can go wrong, it will.”
Murphy’s Laws, Number 1
“. . . And even if it can’t, it might.”
Barton’s Amendment
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OVERVIEW
Principles The Basics Refinements Example
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WHAT IS RISK?
Risk: 1: possibility of loss or injury : peril 2: someone or something that creates or suggests a hazard 3 a: the chance of loss or the perils to the subject matter of an
insurance contract ; also : the degree of probability of such loss b: a person or thing that is a specified hazard to an insurer c: an insurance hazard from a specified cause or source <war risk>
4: the chance that an investment (as a stock or commodity) will lose value— risk·less \'ris-kl?s\ adjective — at risk : in a state or condition marked by a high level of risk or susceptibility <patients at risk of infection> Webster’s Online Dictionary
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WHAT IS RISK MANAGEMENT?
“One should expect that the expected can be prevented, but the unexpected should
have been expected.”Augustine’s Law of Amplification of Agony, (Number XLV)
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WHAT IS RISK MANAGEMENT?
Fundamental skill A management tool Hypothetical problem analysis
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Management
Responses
Uncertainties
Plans
Goals
PRINCIPLES
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EXAMPLE
Taking a Trip Goals Plans Uncertainties Responses Management
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GOALS“As you travel on through
life, Brother, whatever be your
goal, Keep your eye upon the
doughnut, Not upon the hole”
Mayflower Doughnut Shop, 1956
““If you don't know where you are going, you might wind up someplace else.”
Yogi Berra10T. Erickson © 2010 All Rights
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BASICS
Importance of a focus Knowing when you are there S.M.A.R.T.
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EXAMPLE - GOALS
Goal: Arrive at Grandma’s house for
Thanksgiving dinner by 4pm.
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PLANS
“The plan is nothing; planning is everything.”
Gen. Dwight D Eisenhower
“Living consists of figuring out what to do next.”
Unknown
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THE BASICS
Actions Conditions Assumptions Plans
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REFINEMENTS
Precedence relationships Hierarchies of plans.
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EXAMPLE - PLANS
Actions: Bake the sweet potatoes, pack the car,
take I-66, stop for lunch, take I-85 Conditions:
Dry road, get up on time, good health, available fuel
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UNCERTAINTIES
“Life is what happen to you while you are making other
plans.”John Lennon
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THE BASICS
Uncertainties Threat Opportunity Likelihood Impact Velocity Triggers
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REFINEMENTS
Identification Hypothetical problem analysis
Probabilities Consequences
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PROBLEM ANALYSIS
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Problem
ActionAction Action
Condition
Condition
Action
Condition
Action
Condition
Time Now The Past
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HYPOTHETICAL PROBLEM ANALYSIS
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Time Now The Future
Goal?
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EXAMPLE - UNCERTAINTIES
Threats Flat tire, rain, bridge out, run out of gas,
Opportunities New route, less traffic than expected
Events and Conditions
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RESPONSES
“Delay is the deadliest form of denial”
Parkinson’s Law of Delay
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THE BASICS
Mitigations Promotions Contingencies Exploitations Triggers
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Proactive
Reactive
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REFINEMENTS
Prevention Mistake-proofing Controls Process Assets
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EXAMPLE - RESPONSES
Mitigations: Check tire conditions and spare; stay alert; service car before trip, fill tank at start
Promotions: Update maps, GPS data Contingencies: Spare tire, insurance,
AAA, extra gas can, cell phone Exploitations: New favorite restaurant
on the route.
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MANAGEMENT
“It isn’t that things will necessarily go wrong, but
rather that they will take so much more time and effort than you think, if they are
not to.”Wolf’s Law
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THE BASICS
Decisions, Decisions, Decisions. . . Priorities Tolerance
Nothing is so constant as change
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REFINEMENTS
Plan Priorities Mitigation /Opportunity Priorities Contingency/ Exploitation Priorities Risk Tolerance Mitigation/ Contingent Action Tolerance
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EXAMPLE - MANAGEMENT
Decisions: Plan: Should I try a different route? Mitigation: Should I buy new tires? Get a new car? Contingencies: Should I update my AAA
membership? Should I buy a GPS? Changes:
Assumptions: Do I need to remind my brother to bring the green bean casserole?
Conditions: Do I need to worry about the weather?
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Management
Responses
Uncertainties
Plans
Goals
WRAP-UP
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FINAL THOUGHTS
Risks are not Problems Risk Management is not
optional - or avoidable! If we work at it hard enough we
can make it really complicated!
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Murphy Lives!
Be Ready For Him!
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Questions?
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Contact Information:
Tom Erickson, P.E., PgMPAn Enterprise AgilistEmail: [email protected]: 703.201.0021
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