principles of risk management

T. Erickson © 2010 All Rights Reserved 1

PRINCIPLES OF RISK MANAGEMENT

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DisclaimerAny opinions expressed in the following presentation are the author’s and do not reflect those of the Project Management

Institute or its Chapters.

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“If anything can go wrong, it will.”

Murphy’s Laws, Number 1

“. . . And even if it can’t, it might.”

Barton’s Amendment

3T. Erickson © 2010 All Rights Reserved5/18/2010

OVERVIEW

Principles The Basics Refinements Example

4T. Erickson © 2010 All Rights Reserved

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WHAT IS RISK?

Risk: 1: possibility of loss or injury : peril 2: someone or something that creates or suggests a hazard 3 a: the chance of loss or the perils to the subject matter of an

insurance contract ; also : the degree of probability of such loss b: a person or thing that is a specified hazard to an insurer c: an insurance hazard from a specified cause or source <war risk>

4: the chance that an investment (as a stock or commodity) will lose value— risk·less \'ris-kl?s\ adjective — at risk : in a state or condition marked by a high level of risk or susceptibility <patients at risk of infection> Webster’s Online Dictionary


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WHAT IS RISK MANAGEMENT?

“One should expect that the expected can be prevented, but the unexpected should

have been expected.”Augustine’s Law of Amplification of Agony, (Number XLV)


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WHAT IS RISK MANAGEMENT?

Fundamental skill A management tool Hypothetical problem analysis

T. Erickson © 2010 All Rights Reserved

75/18/2010


Management

Responses

Uncertainties

Plans

Goals

PRINCIPLES

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EXAMPLE

Taking a Trip Goals Plans Uncertainties Responses Management


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GOALS“As you travel on through

life, Brother, whatever be your

goal, Keep your eye upon the

doughnut, Not upon the hole”

Mayflower Doughnut Shop, 1956

““If you don't know where you are going, you might wind up someplace else.”

Yogi Berra10T. Erickson © 2010 All Rights

Reserved

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BASICS

Importance of a focus Knowing when you are there S.M.A.R.T.


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EXAMPLE - GOALS

Goal: Arrive at Grandma’s house for

Thanksgiving dinner by 4pm.


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PLANS

“The plan is nothing; planning is everything.”

Gen. Dwight D Eisenhower

“Living consists of figuring out what to do next.”

Unknown


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THE BASICS

Actions Conditions Assumptions Plans


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REFINEMENTS

Precedence relationships Hierarchies of plans.


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EXAMPLE - PLANS

Actions: Bake the sweet potatoes, pack the car,

take I-66, stop for lunch, take I-85 Conditions:

Dry road, get up on time, good health, available fuel


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UNCERTAINTIES

“Life is what happen to you while you are making other

plans.”John Lennon


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THE BASICS

Uncertainties Threat Opportunity Likelihood Impact Velocity Triggers


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REFINEMENTS

Identification Hypothetical problem analysis

Probabilities Consequences


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PROBLEM ANALYSIS


20

Problem

ActionAction Action

Condition

Condition

Action

Condition

Action

Condition

Time Now The Past

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HYPOTHETICAL PROBLEM ANALYSIS


21

Time Now The Future

Goal?

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EXAMPLE - UNCERTAINTIES

Threats Flat tire, rain, bridge out, run out of gas,

Opportunities New route, less traffic than expected

Events and Conditions


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RESPONSES

“Delay is the deadliest form of denial”

Parkinson’s Law of Delay


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THE BASICS

Mitigations Promotions Contingencies Exploitations Triggers


Proactive

Reactive

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REFINEMENTS

Prevention Mistake-proofing Controls Process Assets


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EXAMPLE - RESPONSES

Mitigations: Check tire conditions and spare; stay alert; service car before trip, fill tank at start

Promotions: Update maps, GPS data Contingencies: Spare tire, insurance,

AAA, extra gas can, cell phone Exploitations: New favorite restaurant

on the route.


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MANAGEMENT

“It isn’t that things will necessarily go wrong, but

rather that they will take so much more time and effort than you think, if they are

not to.”Wolf’s Law


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THE BASICS

Decisions, Decisions, Decisions. . . Priorities Tolerance

Nothing is so constant as change


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REFINEMENTS

Plan Priorities Mitigation /Opportunity Priorities Contingency/ Exploitation Priorities Risk Tolerance Mitigation/ Contingent Action Tolerance


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EXAMPLE - MANAGEMENT

Decisions: Plan: Should I try a different route? Mitigation: Should I buy new tires? Get a new car? Contingencies: Should I update my AAA

membership? Should I buy a GPS? Changes:

Assumptions: Do I need to remind my brother to bring the green bean casserole?

Conditions: Do I need to worry about the weather?


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Management

Responses

Uncertainties

Plans

Goals

WRAP-UP

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FINAL THOUGHTS

Risks are not Problems Risk Management is not

optional - or avoidable! If we work at it hard enough we

can make it really complicated!


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Murphy Lives!

Be Ready For Him!


Questions?



Contact Information:

Tom Erickson, P.E., PgMPAn Enterprise AgilistEmail: [email protected]: 703.201.0021

5/18/2010

mailto:[email protected]

principles of risk management

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example goals goal

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