Risk Management

"To live greatly, you must risk greatly. If you only take small risks, you are only entitled to a small life.” Robin S. Sharma

So true, No Risk = No Gain, Risk = Gain. Can we relate this equation to the daily chores we all go through? Well, let’s give it a shot.

Read on if you want to know how you can prove the above equation wrong and see if you can still turn the risk into gains. OHH yes, let’s keep aside our multimillion $ Projects, for a while and look at some bare basic examples which just happen to us daily.

On a long deserted highway, a well experienced driver is zooming past at 120 KMPH in a brand new BMW and oops there comes an abandoned/ betrayed/broken/confused little stray dog. What he does?

Option 1: Take your foot off the accelerator, slam on those brakes, and thank your stars and leave.

Option 2: You just glance at the rear view mirror, swerve off the lane, and thank your stars and leave.

Option 3: You just decide to let the poor betrayed creature go away (Too Sad) and slam into the poor soul. And eventually hurting him & his car as well.

Either of the options you select, there has been this rough sequence of

“Plan => Identify => Analyse Qualitatively => Analyse Quantitatively => Plan Response => Monitor and Control”.

Plan

As the saying goes “Always be ready with Plan B”, don’t we do this every day. In above example whatever option the driver selected at that moment had been planned in his mind, right from the day he took his driving lessons and it becomes so easy over period of time that it seems to be just a normal reaction to the situation. But is only age and experience that brings in risk planning skills? A big No. Then what is required?

• Experience: Comes with age and practice (failures and Success)
• Expertise: Come with Experience, practice and training (Classroom based, on job, mentor, passion)
• Templates / Best Practices: Published by respective Area’s SME.

In our example, best practice, never drive above 80KMPH on Highways similarly as a best practice divide project in manageable and meaningful pieces ex: for Large fix price project with multi-functional stake holders and unclear scope take up scope & requirements phase as a separate project.

Identify

Should I be in pursuit of Positives (Opportunity) or Negatives (Risks) you may think, but either ways we are still trying to reach same destination it’s just that approach and thought process differ (Risk = Opportunity). Just having open eyes doesn't help the cause, then what is that required?

1. Vision and Mission for taking up the Opportunity
2. Information Gathering (Formal and or Casual that may include techniques like DELPHI, Brainstorming, Casual discussion over Coffee)
3. SWOT Analysis
4. Expert Judgment

In our above example driver dint had time to think about his mission and vision to drive the car neither did he had any time to gather the information, but yes he might have done some kind of SWOT analysis and used his expert judgment as well.Similarly in our projects we can use these and many more tools & techniques to effectively identify the opportunities and Risks.

Analyse

Wow something we all like to do Don’t we? We analyse food (Don’t try analyzing food prepared by Wife that’s Huge risk with no opportunity) we analyse people and the list goes on and on. we do analyse the situation some time with conscious mind with all the complex calculations with lot of permutations and combinations and sometimes sub consciously without those complex excel sheet calculations?  i.e. Sixth Sense, Gut Feeling etc. Are there any tools which aid us in doing the Qualitative and Quantitative analysis? Yes.

Some tools we use consciously or sub consciously for Analyzing Quality of Risk may include,

• Risk Categorization
• Urgency Assessment
• Expert Judgement

Some tools we use consciously or sub consciously use for Analyzing Quantity of Risk may include,

• Information Gathering
• Brainstorming
• Casual / formal interviews
• Statistical/mathematical Models
• Sensitivity Analysis
• Expected Monetary Value Analysis
• Monte Carlo Simulations etc
• Expert Judgement

Plan Response

Ok, I have all the things. I have plan, I have identified Risk’s and opportunities,I have done the detailed analysis, so I am safe now? No, still not, coz we don’t have any mechanism to handle the situation should it occur be it Opportunity or Risk. So now it’s the time to change the basic equation “Risk α Opportunity”. This will be little tricky here you will need to work on both ends of the equation by increasing the positive outcomes and reducing the negative effects.

Tools for negating the negativity:

• Avoid: Can we avoid the risk? Yes but not always.
• Transfer: a good example would be car insurance in this context. Or hiring a cab.
• Mitigate: This is about reducing the impact of the occurrence. Ex. What the driver did in our above example.

Tools for appreciating Positivity:

• Exploit: Do whatever it takes to make it happen i.e. Increase the probability.
• Enhance: Driving more benefit out of the outcome.
• Share: Taking support of Others/SME to increase probability and impact of Positive Outcomes ex: Joint bids common in Govt. and Infrastructure project ex. Golden Quadrilateral Road Project.

Monitor and Control

Go out there, take risks and explore possibilities. This is just another zig saw puzzle of putting in all the bits and pieces of Plan, Identify, Analyse Qualitatively, Analyse Quantitatively, and Plan Response. You put it in right place at right time and hurray there you go……..

I hope this helps you in understanding the basic workflow for managing the risks and opportunities in the day to day life as well as the projects. The risk management principle explained here is based on the Risk Management Framework as outlined in PMBOK Guide defined and developed by PMI (Project Management Institute, http://www.pmi.org/)

Manage IT (one of our Systems Plus Brand), through its three services, provides assistance on building IT frameworks, compliance services, identifying and managing IT risks for sustaining growth plans and attaining improved business performance to its clients. 

About Author:

Pradip Sadare is Business Analyst with Systems Plus Pvt. Ltd.  He enjoys relating management with everyday life aspects and works in Managed Captive Model (click here to know more about our managed captive offerings). He can be reached at pradip.s@spluspl.com.