Risk Management – II – Risk Occurrence and Response

The Picture above depicts typical response needed for the occurrence of Risk at various project stages and impact on the Project Goal.risk management Before getting in to the response needed, few definitions here.

Risk – An undesirable situation or circumstance that has both a likelihood of occurring and a potentially negative result. This is typically a likely future event based on various project variables and not yet occurred. The impact is not being experienced yet.
Risk Mitigation – Risk Mitigation plan include the
techniques followed to avoid, reduce and control the chance of occurrence of the likely future event called risk. These may include changes to the requirements, actions to reduce the occurrence such as assignment of more responsibilities etc.

Contingency Plan – A contingency plan is essentially the planned actions in the event of failure of mitigation. All efforts are put on the reduce the chance of occurrence, but the despite best efforts, the risk may occur. The contingency plan depicts, the course of action when the risk occurs. This is essentially the plan B.
Issue Management – Issue is an event or condition that has already occurred and has negligible or little impact on the goals. The impact is negligible as a work around possible and the project goal can still be achieved. The issue management will depict the actions to be taken in these condition to bring normalcy to the program.

Risk Management  is the collective term used to describe the actions taken to avoid the risk or decrease the impact of the risk

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Originally posted 2014-02-23 11:11:00.

Risk Management II – Benefits of Risk Management Program

The earlier article on Risk Management is Risk Management I – A proactive approach to resolve future root causes and their potential consequences.

Purpose of a Risk Management Plan
Risk management program helps the organization to deal with potential occurrences.  It defines the approach and attitude towards risks. This program helps in
  1. identifying what are those risks the organization is ready to accept.
  2. The plan to deal with those unacceptable risks
  3. defines the main requirements of risk mitigation plan.
 The risk Management program helps the organization in the following ways:
  • To identify risks and prepare an action plan to deal with the risk
  • To reduce occurences and impacts of risk
  • To understand significance/severity of risks
  • To promote organizational behaviors focused on risk management
  • To increase effectiveness of product and service delivery to customer
  • Create a process for who, what, when, where, how and how much.
  • Maintain information on historic issues.
  • Capitalize on historic issues to prevent future issues.
  • Bring out hidden risk knowledge, so it can be managed.

Benifits of Risk Management Program

  • Encourage proactive management
  • Be aware of the need to identify and treat risk throughout the organization
  • Improve the identification of threats
  • Comply with relevant legal and regulatory requirements and international norms
  • Improve financial reporting and governance
  • Improve stakeholder confidence and trust
  • Establish a reliable basis for decision-making and planning
  • Improve organizational controls
  • Effectively divide and use resources for risk treatment / handling
  • Improve operational effectiveness and efficiency;
  • Cost of risk management is typically less than the cost of issue management
  • Enhance health and safety performance
  • Enhance environmental protection
  • Minimize losses and improve loss prevention
  • Minimize the cost and efforts in managing incidents
  • Improve organizational learning and resilience
  • Increase the likelihood of achieving goals

The most important benefit of the risk mitigation program is that it gives the organization a future visibility. It deals with future events and not manage the current issues. The organization will be ready to face the realization of the risk. This gives a state of readiness against the potential consequences

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Originally posted 2013-10-27 17:48:00.

Risk Management I – A proactive approach to resolve future root causes and their potential consequences.

Risk Management gives the visibility on the future root causes, their consequences and ways to reduce the impact of the potential negative effects of these future root causes.  The underlined words “Future” and “potential” here indicate, it is a futuristic strategy of the organization. Risk Management can be applied at all levels of the organization. It can be applied at project, level, unit level or at organization level.
Risk Management is not a mandatory process required for ISO 9001. However, this is a Mandatory process as per AS 9100 and, a Maturity level 2 (ML2) process area for CMMI. Even though the requirements of both AS 9100 and CMMI are similar, there are subtle differences between these two.

To discuss more on the Risk Management (RSKM) we will start with few definitions.

What is Risk?
Risk is an undesirable situation or circumstance that has both a likelihood of occurring and a potentially negative consequence.
This is possible at every stage of Production or Service Provision, right from the contract development stage till Post Sales. The potential negative consequence chiefly rely on the Quality, Schedule or Cost. Whatever effort you put in, the process at every stage has some possible slippage (Remember Murphy). The Organization shall look at identifying and mitigating the effects of these likely slippage, at all Levels.

What is risk management?. Why is it needed?
Risk Management is an iterative process to identify, assess, reduce, accept, and control risks in a systematic, proactive, comprehensive and cost-effective way, taking into account the business, costs, technical, quality and schedule programmatic constraints.
Risk Management is needed to reduce the chances of potential negative result of a likely event on the business. This involves a focus on the risks to meeting customer requirements, and preventing product non conformance escapes.   The absence of a Risk Management program can result in known, unknown, and unknowable /unforeseen problems for the Customer and Stakeholders about the cost, schedule, and technical performance of programs and about the quality and on-delivery performance of products and services.

In the Second Part, we will discuss the benefits of a Risk management program.
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Originally posted 2013-10-13 05:22:00.