This document discusses risk management in corporate projects. It defines risk as uncertainty that matters, which can include both threats and opportunities that positively or negatively impact project objectives. Risks come in four types: event risks involving uncertain future events, variability risks where certain events have uncertain characteristics, ambiguity risks where the characteristics of certain events are unknown, and emergent risks involving unknown unknowns. The key phases of risk management are identified as risk identification, assessment, response, and monitoring/control. Response strategies should address both threats and opportunities. Managing risk is important for achieving project objectives on time and on budget while also finding potential benefits.

1. RISK MANAGEMENT
“Mitigating the Risk in the Corporate World
for Global Competence.”
Michael A. Alonzo
A presentation for MSEUF BSBA Class Seminar

2. We all know what “risk” means right?

3. What is risk?
RISK Uncertainty
TRUE or FALSE?
“Not all uncertainty are risks but all risks are
uncertain”
RISK = UNCERTAINTY THAT MATTERS

4. RISK = Uncertainty that Matters
SOURCE UNCERTAINTY THAT MATTERS
PMT PMBok (2013) An uncertain event or
condition …
that if occurs has positive
or negative effect on
project objectives.
APM Body of Knowledge
(2012)
An uncertain event or set
of circumstances…
that, should it or they
occur would have an effect
on achievement of one or
more project objectives.
ISO 31000 (2009) Effect of uncertainty… on objectives.

5. 2 KEY QUESTIONS
• WHAT KIND(S) OF UNCERTAINTY?
• WHAT KINDS OF MATTERING?

6. TWO TYPICAL ANSWERS
1. Uncertain future events…
2. with a negative effect on budget or schedule

7. Is that all?
Risk in projects is much more than THREATS,
i.e. bad uncertain future events that, if they
happen, would have a negative effect on the
project budget and/or schedule.
Any uncertainty that matters is a risk that
needs to be identified, assessed and managed

8. What are we missing?
• RISK = uncertainty that matters
Different types of uncertainty
- Not just uncertain future events
Different types of effect
-not just threats to time and cost

9. WHICH IMPACTS MATTER?
Opportunities as well as Threats
• Both need managing proactively
• Managing risk means…
– Not only preventing potential problems
• “stop things going wrong”
– …but also finding potential benefits
• “making things go right”

10. Not just threats
• “An uncertain event or condition that, if it
occurs has positive or negative effect on
project objectives.

11. Which objectives?
Not just time and cost
Any objective can be affected by risk (positive
or negative):
Technical Performance Market share
Health and Safety Reputation
Regulatory Compliance Customer satisfaction
Profitability/margin

12. Risk = uncertainty that matters
• On the “mattering” side:
Positive as well as negative impacts
– Opportunities as well as threats
All project objectives are in scope
– Not just time and cost

13. What kind of Uncertainty?
Not just uncertain future events:
• “An uncertain event or condition that, if occurs,
has a positive or negative effect on project’s
objectives” -PMBOK
• An uncertain event or set of circumstances that,
should it or they occur, will have an effect on
achievement of one or more project objectives” -
APM

14. What kind of Uncertainty?
Any uncertainty that matters, including:
1. Event Risk (Stochastic)
2. Variability Risk (Aleatoric)
3. Ambiguity Risk (Epistemic)
4. Emergent Risk (Ontological)
If it matters,
it must be managed.

15. 1. Event Risk (Stochastic)
• Uncertain future events that may or may not
happen
• Examples:
1. Key supplier may go out of business during the project
2. A terrorist attack
3. Natural disaster
4. Industrial accidents

16. 2. Variability Risk (Aleatoric)
• Certain future events with variable characteristics
 Examples:
– Productivity may be above or below target
– Cost of raw materials may rise of fall
– Unseasonal weather condition may occur

17. 3. Ambiguity Risk (epistemic)
• Certain future events with ambiguous characteristics
 Example:
– Competitors reaction to a new product launch
– Client demands use of new technology outside company’s
experience
– New regulations are expected but scope of change is
unknown

18. 4. Emergent Risk (ontological)
• Conceptual limitations of world-view
“Unknown-and-unknowable unknowns”
Examples:
– Disruptive technology
– Game-Changers

19. DISRUPTIVE TECHNOLOGIES
Sometimes a technology and resulting business
innovation comes along to radically change the
business landscape and environment.

20. Why manage risks?

21. Phases of Risk Management
• Risk Management can be broken down into four
main elements
Risk Identification
-brainstorming, interviews, research, observation etc
Risk Assessment
– Qualitative or Quantitative
Risk Response
– using risk information to make decision
Risk Monitoring/Control

22. RISK IDENTIFICATION

23. THINK THE UNTHINKABLE!

24. RISK ASSESSMENT
• Qualitative

25. RESPONSE to

26. RISK RESPONSE

27. Response to Threats and
Opportunities

28. How many frogs are on the log?
There are 5 frogs sitting on the log,
4 decided to jump off…

29. RISK MONITORING/CONTROL
• Implement the strategy
• Adjust strategy
• Periodic risk review
• Learn from the past actions
• Learn to handle risk safely