Basic of Risk Management for Project Managers and Functional Managers

1. risk basics

2. risk
definition
risk is an uncertain event that
may have a positive or negative
impact on your operations.
risk.

3. characteristics
to understand
probability
what is the surety that the risk will occur?
occurrence
how to know if the risk has occurred or about to occur?
impact
what is the impact or outcome of the risk event?

4. ultimate
impact
direct cost
extra items
excess items
rate fluctuations
quality
material
man hours
services
time
liquidated damages
detention charges
excess wages

5. risk
management
pro active approach
being prepared for the risk
foresight
protocols
resources
response

6. risk identification

7. stakeholder
participation
Production Site
Management
finance logistics

8. identify
risks
risk is can originate from and / or
have a resulting impact on different
functional areas of your organization.
brain storming

9. items to
identify
risk event
the nature & origin of the risk and the risk event itself
trigger and occurrence
prior events that indicate that the risk is about to occur as well as
the characteristics of the occurrence of risk.
owner
person responsible for monitoring particular risk and coordinating
the risk management activities.

10. items to
identify
probability - impact
the percentage likelihood of the risk to occur and the potential
impact it will have in terms of value.
acceptance thresholds
the likelihood and impact values that can be accepted and avoid
mobilizing the risk response mechanism.
response
in case of occurrence of the risk, what response activity needs to
be carried out to amplify, reduce or eliminate the impact.

11. risk
register
identifier
risk event
description
owner
probability
impact
score
acceptance
thresholds
trigger
response
status
residual risk

12. identify
risks
risk identification is a dynamic
process, hence periodic reviews are
necessary to discuss identified risks
and identify new risks.
risk review

13. identify
risks
residual risk is the small acceptable
risk remaining or resulting out of the
risk response.
residual risk

14. identify
risks
risks arising out of the risk response
with an affect greater than that of
residual risk
secondary risk

15. risk assessment

16. risk
qualification
risk threshold is the quantum of
risk that you are willing to accept.
risk threshold

17. understanding
risks - reward
risk to reward ratio is an indicator of
how much you gain or save for every
dollar risked.
risk reward

18. risk
qualification
all risks may not be significant,
hence identifying and qualifying
the risks becomes necessary.
qualification

19. qualified
risks
plan name probability acceptance impact acceptance
Product Specifications 05% 00% $ 4,000 $ 5,000
Rate Variation 02% 05% $ 750 $ 1,000
Delivery Time (Date) 15% 10% $ 5,000 $ 1,000
Transport 15% 20% $ 400 $ 500
Product Quality 10% 05% $ 5,000 $ 250
Installation 05% 05% $ 1,000 $ 250

20. risk
quantification
risks have a positive or negative
impact on your operations and in
order to plan response and
contingency, we need to quantify.
quantification

21. risk
quantification
plan name probability impact Score
Product Specifications 05% $ 4,000 $ 200
Delivery Time (Date) 15% $ 5,000 $ 750
Product Quality 10% $ 5,000 $ 500
Installation 05% $ 1,000 $ 50
Contingency $ 1,500

22. additional
points to consider
contingency reserve
resource used to mobilize and deploy risk response measures
value of contingency reserve
may be lower than the cumulative value of individual impacts but
should be greater than or equal to the sum of two largest impacts.
fall back plan
in case the risk responses fail to keep operations on track, second
line of actions required to continue operations.

23. risk response

24. negative
risks (threats)
risk avoidance
change your course of actions
or strategy to avoid the risk
event or setting off the risk
triggers
risk transference
transfer the impact of risk event
to a third party or down the
chain through contractual
arrangement
risk mitigation
course of actions or strategy to
minimize or eliminate the
impact of the risk event
risk acceptance
do nothing, just let the risk
event occur if the cost of
response surpasses benefits

25. positive
risks (opportunities)
share opportunity
share the opportunity with a
third party or down the chain
through contractual
arrangement
enhance opportunity
course of actions or strategy to
amplify the impact or outcome
exploit opportunity
utilize available resource to
extract the maximum possible
benefits
reject opportunity
do nothing, reject the
opportunity if the logistics of
response outweighs benefits