Unit 3University of Sunderland CSEM04 ROSCO

Unit 3:Unit 3: Risk and Opportunity Risk and Opportunity Life CyclesLife Cycles

CSEM04: Risk and Opportunities of Systems Change in Organisations

Prof. Helen M Edwards

Unit 3University of Sunderland CSEM04 ROSCO

OverviewOverview• Risk and Opportunity Life Cycles.• Technical Definitions• Risk, opportunity, or problem• Risk Definition• Is Risk Negative?• Assessment of Risk and the Impact of Time.• Risk Perception and Attitude• Importance of perspective• Risk averse v. risk taker• Risk generic lifecycle• Risk and Opportunity generic lifecycle• Dealing with Risk (Risk Management)

Unit 3University of Sunderland CSEM04 ROSCO

Risk and Opportunity Risk and Opportunity Life Cycles.Life Cycles.

• Traditionally look at risk management – essentially inward

looking– controlling/preventing

risks

• Here also want to look at opportunity management – outward looking– seeking new

opportunities.

System Change

Risk management

Opportunity management

Unit 3University of Sunderland CSEM04 ROSCO

Technical DefinitionsTechnical Definitions

• Risk is the possibility of loss, the loss itself or any characteristic, object or action that is associated with that possibility. – A loss is defined as an outcome that falls short of what

was expected.• “Expectations” are held/defined by stakeholders.

– (Risk in the RISKIT method , Kontio 1997).

Unit 3University of Sunderland CSEM04 ROSCO

Risk, opportunity, or Risk, opportunity, or problemproblem

• Risk and opportunity are inextricably linked with time (particularly the future).– Focus: determining the likelihood, cost/benefit of

the outcomes of “what-if scenarios”. – Focus: uncertainty and decision analysis,

• based on existing data of past experiences, expectations and (often) prejudices.

– As soon as an outcome is reached in a risk or opportunity scenario the risk/opportunity ceases to be an issue.

• But the outcome is either positive or negative.

Unit 3University of Sunderland CSEM04 ROSCO

Risk DefinitionRisk Definition

• In any particular context each risk needs to be defined. – The components that need to be assessed in

order to estimate the overall risk need to be clearly identified and understood,

– The measures that can be taken for the components need to be identified so that the risk can be monitored and evaluated

– Therefore appropriate data needs to be collected at the appropriate time.

Unit 3University of Sunderland CSEM04 ROSCO

Is Risk Negative?Is Risk Negative?

• We tend to think of risk as negative -– essentially we’re looking at a decision point

and emphasising the negative results. – It’s a matter of perspective:– Thinking of changing a system?

• What can go wrong? - are these risks?• What can we gain? Are these risks?

– Thinking of staying with a system?• How can we best use it? - are these risks?• What opportunities might we lose? Are these risks?

Unit 3University of Sunderland CSEM04 ROSCO

Assessment of Risk Assessment of Risk and the Impact of Time.and the Impact of Time.

• Risk = Probability x Impact.

• But…both the probability and the impact of an event happening can change over time.

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Unit 3University of Sunderland CSEM04 ROSCO

Assessment of Risk Assessment of Risk and the Impact of Time.and the Impact of Time.

• Risk assessment relies on the availability of relevant data and information. – Some risks can be

readily assessed, others can’t,

– but the risk assessment must always be “timely”.

Unit 3University of Sunderland CSEM04 ROSCO

Risk Perception Risk Perception and Attitudeand Attitude

• In assessing (and even identifying risks) people’s preconceptions and prejudices come into play.– In different groups the reaction to a risk-laden

scenario can vary, with entrepreneurs keen to exploit opportunities and others looking to minimise their exposure to risk.

– The reaction may vary depending upon:• the amount at stake, • the context of the risk and • the time horizon.

Unit 3University of Sunderland CSEM04 ROSCO

Importance of Importance of perspectiveperspective

• Issue: “New Technology to be used in system change”

• Risk perspective = no experience of this – how do we ensure this doesn’t cause problems?

• may lead to consideration of training staff in advance, bringing in experts etc.

• Opportunity perspective = we can become leaders in our field– should give potential for growth and market

dominance • how do we exploit/ensure this?

Unit 3University of Sunderland CSEM04 ROSCO

Risk averse Risk averse v. risk takerv. risk taker

• Organisations and people tend to be on a spectrum of risk averse to risk taker

• risk averse: – Inward, focus on control on risks and resolution

of problems

• risk taker (entrepreneur)– Outward, focus on looking for opportunities,

expect the payoff to be worth the risk taken.

Unit 3University of Sunderland CSEM04 ROSCO

Risk generic lifecycleRisk generic lifecycle

allocating&monitoring budget levels

continual risk monitoring

mitigation and contingency planning

modelling riskrelationships

risk prioritisation

risk impact and probability evaluation

goal definition

risk identification

Unit 3University of Sunderland CSEM04 ROSCO

Risk and Opportunity Risk and Opportunity generic lifecyclegeneric lifecycle

allocating&monitoring budget levels

continual risk monitoring

mitigation and contingency planning

modelling riskrelationships

risk prioritisation

risk impact and probability evaluation

goal definition

risk identification

Replace “risk” by

“risk and opportunity”

throughout

Unit 3University of Sunderland CSEM04 ROSCO

DDealing with Risk ealing with Risk (Risk Management)(Risk Management)

• The options available include– Proactive risk management.– Interactive risk management.– Reactive risk management.– Inactive risk management.

• Most risk management approaches are developed to help those who have an interactive risk management approach.

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