How many people have never been on an aeroplane? How many people have flown on an aeroplane in the last year? Taking you to a situation where a pilot looks to manage risk and thinking quickly he came up with the following announcement….. (see slide build) Can I now have a show of hands for those who would think twice about flying on that aircraft at that time? As can be seen from this example, appetite is quite dynamic as well and needing to be viewed in terms of the context in which it is found.
Risk AppetiteLadies and gentlemen, this is the captain speaking.Firstly, I’d like to thank you for choosing to fly FlyMe Airlines.As we taxi out of the runway please make yourself comfortable…And for those of you sitting on the right side of the plane…Please look to your LEFT!
Ladies and gentlemen, this is the captain speaking. Firstly, I’d like to thank youfor choosing to fly FlyMe Airlines. As we taxi out of the runway please makeyourself comfortable…and for those of you sitting on the right side of the plane…please look to your LEFT!
Section 2: Black Swans“...there are also unknown unknowns – the ones we dont knowwe dont know. And if one looks throughout the history ofour country and other free countries, it is [in this] categorythat tend to be the difﬁcult ones.” (Donald Rumsfeld,2002)
What is a Black Swan Event?What is a Black Swan Event?1. it occurs outside projected expectations (afat tail to a distribution curve)2. it carries extreme impact; and3. it seems explainable after the fact
Examples of Black Swan EventsExamples of Black Swan Events1. Fukushima power plant disaster, Japan(2011)2. Volcanic Ash Cloud - Eyjafjallajokul (2010)3. Urban unrest (2011)
Quantitative methods to simulateQuantitative methods to simulateBlack Swan EventsBlack Swan Events1. Modelling risk interactions – e.g. extremechanges to correlation assumptions2. Stress and scenario testing – e.g. series ofearthquakes and tsunamis occur and anuclear plant collapse in Japan3. Horizon scanning – Methodical way ofidentifying threats and opportunities
Section 3: Project Life CycleRisk Assessment Process
Project Life CycleSustainable Business Case using National and Local StrategiesPost Mortem after ClosedownProjectOpportunityProjectConceptualisationProjectAppraisalRisksAlternativescenarios andoptions andrelated risks andopportunitiesProjectPlanningProjectConstructionandMonitoringProjectClosedownRisk Assessment
ImpactProbabilityLow Medium High Very HighLowMediumHighVery HighTop 10 Risks – Design Project1. x ( a brief statement of risk – one linersare sufficient – remember it is a risk sonegative in tone)2. x ( a brief statement of risk)3. x ( a brief statement of risk)4. x ( a brief statement of risk)5. etc6. etc7. xx8. xx9. xx10. xx362487 1910
• This strategy indicates that the project has decided not to change theproject plan or is unable to identify any other suitable strategy to adopt.• Risk acceptance may also occur when the cost of dealing with it wouldnot be cost effective.• This could also mean reject the risk if considered that it will not be athreat to the project.TolerateRisk Response Planning, Monitoring and Control
Terminate• Risk termination means changing the project plan to eliminate the risk orto protect the project objectives from its impact. Although not all riskscan be totally eliminated some may be avoided by taking this pre-emptive action.• In extreme cases, this could mean abandoning the project.Risk Response Planning, Monitoring and Control
• Risk transfer means moving risk to a third party together with ownershipof the response.• Transferring the risk does not eliminate it; it simple gives another partyresponsibility for its management (e.g. Outsource).• Or this could mean taking adequate insurance cover and pass the riskto an insurance company.TransferRisk Response Planning, Monitoring and Control
• A treating a risk can lead to two actions• Make contingency arrangements. Risk mitigation may take the formof implementing new processes, undertaking more preliminary workor for example, selecting more stable suppliers.• Contain the risk. This strategy seeks to reduce the risk probability orits impact by taking early action to reduce the occurrence of the riskto an acceptable limit.TreatRisk Response Planning, Monitoring and Control
Risk Response Planning, Monitoring and ControlTolerateTerminateTreatTransferExamples for your designproject?
Section 4: Deliverables for each designproject team
Task 1: Create a risk appetitestatement for each design project.This should include qualitative andquantitative measures
Task 2: Identify your top risks (max10) by completing the followingmatrix for each design project
Task 3: For each risk, identifymitigating actions by describingwhether you propose to tolerate,terminate, transfer and treat therisk. Describe your actions andrationale