CloseQuarter Risk Management Methodology © Close Quarter Limited 2005 .

CloseQuarter

Risk Management Methodology

© Close Quarter Limited 2005 www.closequarter.co.uk

“Risk management method” (v1.1) 5 April 2005 - Page 2©2005 CloseQuarter Ltd. (www.closequarter.co.uk Tel: 020 7748 2225)

Why bother with Risk management?

Project plans are often developed in the expectation that everything will go to that plan, however projects rarely go straightforwardly to plan, for example:

- Resources may not be available as needed

- Stakeholders may resist or oppose the project

- Other, higher priority tasks may arise

- Requirements may change

- The business case may need to be changed

- Deliveries of part or all of the solution may be late Risk management aims to:

- Identify and assess key risks, and put in place agreed actions – and specific owners of these to mitigate or eliminate the risks

- Track the risks regularly and ensure they are properly managed

- Ensure the sponsor and all other key stakeholders have complete visibility of the risks, so enabling them to make any necessary judgements on intervention. Thereby ensuring ‘no surprises’

- Be simple and easy to apply – otherwise it just wont get done

Introduction & objectives

No worthwhile project is risk free

If a project is worth doing, then its risks are worth managing


Risk management: helping your sponsor and boss sleep better at night

It’s easy when you are fully involved in the delivery of a major programme to overlook the needs of your sponsor, key stakeholders (and your manager) to feel confident that the project (or programme) is under control

Ideally you should be able to communicate your level of control in a simple transparent manner, which does not consume too much time and effort from the individuals charged with oversight of the safe delivery of the programme

Bureaucracy and over reporting can kill projects. You want to avoid the Dilbert’s boss syndrome where reporting and project administration becomes more important than the project itself

The risk management method described below sets out to provide a simple and powerful method of control

We want to help you ensure that your project sponsor can be confident that your project is under control and you are focusing on what really matters

Introduction & objectives


Identify additional “unstated assumptions”, which are critical for the

success of the project. Are you dependent on another function or external party for

your success?

Risk Management Process Summary

Risk Management Process Summary

The main objective of the risk management method is to ensure that all key risks identified are actively managed

Consult “subject matter experts” to determine whether

there are further risks from their experience that you should

consider additionally

22

33

Create suitable action plansCreate actions to eliminate or mitigate each risk.

It may not be possible to eliminate the risk in the short term, in these circumstances determine what actions

might reduce the likelihood of the risk, mitigate or delay its impact or develop a contingency plan

44

Track Risks66

Who? What? When?

Identify key issues and risks

11

Rate Riski. Group risks into similar categories

ii. Create a new category if a particular risk doesn’t fit with your existing categories

iii. Rate the risk associated with each category

iv. Then determine the overall level of risk for your workstream

55

Com pa ny Reference Number Risk Ra ting

Risk Descriptio n Owner —Nam e

Action By

Action Status

Im pa ctPro ject Number

EU Asia NACom pa ny Reference Number Risk Ra ting

Risk Descriptio n Owner —Nam e

Action By

Action Status

Im pa ctPro ject Number

EU Asia NA

Overview


Example – developing a risk management plan: Arranging a wedding and reception on a Caribbean island

Step 1: Initial Key Risk Assessment

Risk Assessment

? Availability of flights to Caribbean Island

? Marriage license not considered valid outside of the Caribbean

? Wedding rings lost in transit

? Caterers not available during visit

? In-laws unable to fly from USA for medical reasons

? Costs/budget unknown

? Parents and family not able to come due to existing commitments

Illustrative


Partner prefers wedding ceremony in Caribbean rather than a traditional wedding in home town

Hotel has sufficient capacity and availability for preferred weekend

Friends and family are happy to travel to Caribbean for ceremony

My partner wants to get married rather than stay single!

It is helpful to get a third party to interview you to uncover the unstated assumptions underpinning the success of the project/ workstream that you are managing

It is helpful to get a third party to interview you to uncover the unstated assumptions underpinning the success of the project/ workstream that you are managing

Step 2: Unstated Assumptions

To avoid hitting the project “icebergs” all risks should be made visible, particular the “unstated assumptions” we take for granted

Illustrative

Risk Assessment


Guests need to have had inoculations to travel safely to the Caribbean

Take out insurance cover to protect against the tour operator going bust

Have you arranged a suitable venue for the stag party? – can you get the guests to the wedding in time after this event?

Have you arranged a suitable venue for the hen party?

“You don’t know what you don’t know!” So ideally consult an expert who has experience in tackling your particular subject area!

Step 3: Subject Matter Expertise Illustrative

??

??

??

??

Risk Assessment


"ID (#)" Category Risk/Issue

1 Logistics Availability of flights to Caribbean Island

2 Legal Marriage license not considered valid outside of the Caribbean

3 Ceremony Wedding rings lost in transit

4 Reception Caterers not available during visit

5 Logistics In-laws unable to fly from USA for medical reasons

6 Financial Costs/budget unknown

7 Logistics Parents and family not able to come due to existing commitments

8 Ceremony Partner prefers wedding ceremony in Caribbean rather than a traditional wedding in home town

9 Logistics Hotel has sufficient capacity and availability for preferred weekend

10 Logistics Friends and family are happy to travel to Caribbean for ceremony

11 Emotional My partner wants to get married rather than stay single!

12 Logistics Guests need to have had inoculations to travel safely to the Caribbean

13 Financial Take out insurance cover to protect against the tour operator going bust

14 Emotional Have you arranged a suitable venue for the stag party? – can you get the guests to the wedding in time after this event?

15 Emotional Have you arranged a suitable venue for the hen party?

We can then assemble all of the risks to understand our complete risk exposure at this point

Illustrative

Risk Assessment


"ID (#)" Category Risk/Issue

3 Ceremony Wedding rings lost in transit

8 Ceremony Partner prefers wedding ceremony in Caribbean rather than a traditional wedding in home town

11 Emotional My partner wants to get married rather than stay single!

14 Emotional Have you arranged a suitable venue for the stag party? – can you get the guests to the wedding in time after this event?

15 Emotional Have you arranged a suitable venue for the hen party?

6 Financial Costs/budget unknown

13 Financial Take out insurance cover to protect against the tour operator going bust

2 Legal Marriage license not considered valid outside of the Caribbean

1 Logistics Availability of flights to Caribbean Island





12 Logistics Guests need to have had inoculations to travel safely to the Caribbean

4 Reception Caterers not available during visit

We then group the risks into their logical categories to help us understand the overall risk exposure at this point

Illustrative

Risk Assessment


At the end of the week/month it is useful to transfer (cut and paste) closed risks into the Closed Risks worksheet for future reference

At the end of the week/month it is useful to transfer (cut and paste) closed risks into the Closed Risks worksheet for future reference

The next step is to determine actions which will either eliminate or mitigate each risk – in each case be specific on Who, What, When?

Action Planning

Illustrative

Risk Log - Open

Risk Log - Closed

Step 4: Create suitable action plans

The initial priority is to identify actions for those areas of greatest perceived risk

ID(#) (Started or Complete)

Category Risk/Issue Action(s)Date

requiredDate

completedWho Status

1 Logistics Availability of flights to the Caribbean Island

Check flight availability with travel agency

1-Oct-02 30-Sep James Completed


See if possible to travel to Gulf of Mexico and take a cruise

8-Oct-02 Ann


Contact family to determine existing commitments for 2003

01-Oct-02 James Started


Ring hotel and check availability in August 2003

08-Oct-02 01-Oct-02 Ann Completed


Check best man and bridesmaids are available for date in August 2003

01-Oct-02 James

12 Logistics Guests need to have had innoculations to travel safely to the Caribbean

Include in wedding invitation checklist 01-Nov-02

Ann


A 4 point scale is preferred to avoid middle score bulging – i.e. everything is set to AMBER!

A 4 point scale is preferred to avoid middle score bulging – i.e. everything is set to AMBER!

It is suggested that risks are then summarised on a weekly/monthly basis and assigned a risk assessment for each category and an overall assessment for the whole workstream using a four point scale

RAG Status Risk Assessment

GREEN(Minimal/ low risk)

All under control with no significant risks to manage. There may be some minor risks/issues but these have clear action plans in place. If there are no significant risks to manage, then set the risk assessment at GREEN!

A1Medium risk. Some risks apparent but with clear action steps in place with high confidence of their successful implementation.

A2High risk. Major risks have been identified, however action plans that eliminate these risks are not yet fully developed.

REDCRITICAL. Potential show stopper risks, some action plans in place but even when these are implemented, significant risk exposure will remain.

IllustrativeStep 5: Rate Risk

Risk assessment


Overall Risk Assessment Workstream Overall Comment

A2 Wedding EventThe most significant issue is to confirm that we do want to spend the rest of our lives together and we are meeting tonight to confirm

"ID (#)" Category Risk/Issue Action(s) Date Required

A2

Logistics Availability of flights to Caribbean Island Check flight availability with travel agency 1-Oct-03

Logistics In-laws unable to fly from USA for medical reasons See if possible to travel to Gulf of Mexico and take a cruise 8-Oct-03

Logistics Parents and family not able to come due to existing commitments Contact family to determine existing commitments for 2004 01-Oct-03

Logistics Hotel has sufficient capacity and availability for preferred weekend Ring hotel and check availability in August 2003 08-Oct-03

Logistics Friends and family are happy to travel to Caribbean for ceremony Include advice on innoculations required with wedding invitations

01-Nov-03

Logistics Guests need to have had inoculations to travel safely to the Caribbean Send out invitations and determine likely number of guests and who is able to attend the ceremony

01`-Nov-03

A2

Ceremony Partner prefers wedding ceremony in Caribbean rather than a traditional wedding in home town

Conversation with partner to agree that the Caribbean is the perfect location for our wedding

01-Oct-03

Ceremony Wedding rings lost in transit Take out insurance to cover possible loss in transit 20-Nov-03

GREEN

Financial Costs/budget unknown Prepare budget based on number of guests, likely venue etc. 08-Oct-03

Financial Take out insurance cover to protect against the tour operator going bust Identify list of insurers – contact one with appropriate cover and purchase

20-Oct-03

A2Legal Marriage license not considered valid outside of the Caribbean Contact Marriage Licensing in UK to determine steps for

getting legally married in the Caribbean08-Oct-03

A2Reception Caterers not available during visit Research on internet to determine suitable caterers in location

and availability08-Oct-03

RED

Emotional My partner wants to get married rather than stay single! Have a serious chat with partner and establish whether they really do want to spend the rest of their life with me

01-Oct-03

Emotional Have you arranged a suitable venue for the stag party? – can you get the guests to the wedding in time after this event?

Contact travel agent to determine a list of suitable venues in the Caribbean

01-Nov-03

Emotional Have you arranged a suitable venue for the hen party? Contact travel agent to determine a list of suitable venues in the Caribbean

01-Nov-02

The Risk Summary Report can be used as a tool to inform key stakeholders and management on a regular basis of the project risk status

Step 5: Rate Risk

Individual Risk Assessment for each Category

Individual Risk Assessment for each Category

Risk Summary

Overall Workstream Risk Assessment

Overall Workstream Risk Assessment

Overall Comment regarding the Overall

Risk Assessment

Overall Comment regarding the Overall

Risk Assessment

Risk assessment


A simple traffic light scheme suffices to identify high-rated risks for close attention. Some suggested guidance on how you might assess risks

If Impact = A A A A B B B B C C C C D D D D And Likelihood = A B C D A B C D A B C D A B C D Then Overall Risk = A B C C A B C D B C D D B C D D

Impactif risk occurs

A Inconvenient but deadline, scope and resources probably unaffected

B Disruption to deadline, scope or resources

C Major disruption, deadline and/or scope compromised but project will probably still complete

DMajor disruption - deadline and/or resources, and/or scope, severely compromised; high risk of project failure

Likelihood of risk

occurring

A Low risk of happening (0-10%)

B Medium probability (11-30%)

C Medium-high probability (31-70%)

D Very high probability (>70%)

Rating of risk overall

Warning: A traffic light is just an indicator – it is not a substitute for thinking or judgement

Risk assessment


The Project Manager can then report the Overall Risk for the Project by assessing the risk in each workstream

Risk Assessment

Workstream Overall Comment

Overall RiskAssessment

Comment

Date: dd month year

Risk assessment


Getting a powerful risk assessment in place can be done quickly

If you do not have a risk plan in place already, you can generate a first draft in a workshop event taking 1 to 2 hours for most projects. For large complex programmes, you may wish to start with a high-level overview assessment which can then be followed up by more in depth follow-up events and interviews for particular areas

We would suggest you run a workshop with key stakeholders and those key individuals involved in delivering significant parts of the project

Suggested workshop approach

- Brainstorm a list of potential risks, putting each onto a ‘Post-it’ note on the wall

- When the flow dries up, prompt with probing questions until all are agreed the list is sufficiently complete or the allotted time runs out – any risks identified later can (must) always be added to the list

- Group the risks by their affinity to each other – aim for 4-10 groups

- When this has been completed, name the groups (see next slide for typical categories for a change project involving technology)

Getting started

A risk workshop can ensure the key individuals involved in the project have a powerful shared understanding of the potential risks to be managed


Typical risk categories for a change project involving technology

Every project or programme is different, however there are frequently common categories that can be found across projects

For example some Typical risk categories for a change project involving technology include:

- Value Realisation – Projects exist to deliver value to the organisation. One needs to ensure delivery of the value and benefits originally promised to justify the project in the first place are on track

- Stakeholder Management - Lack of buy in, failure to clear obstacles or actual opposition threatens project success. Stakeholders can be individuals, departments, functions or indeed external partners

- Resource, Management & Planning - Problems with approach, scope, time, resource (human and otherwise) or decision making that impact project delivery

- Technical - Problems with technical aspects of the solution or with the conduct of the project

Getting started

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