The Concepts of Risk Management
Every project manager and business leader needs to understand the practices and concepts of effective risk management. Learning how to identify and treat risks for an organisation, a programme or perhaps a project can help to save unnecessary difficulties afterwards, and can prepare managers and team people for just about any inevitable incidences or issues.
The OGC M_o_R (Control over Risk) framework identifies twelve concepts, that are intended “not … to become prescriptive but [to] provide supportive guidance to allow organisations to build up their very own policies, processes, strategies and plan.”
A simple principle of generic management methods, including PRINCE2 and MSP in addition to M_o_R, is the fact that all organisations will vary. Project managers, programme managers and risk managers have to think about the specific context from the organisation to guarantee thorough identification of risks and appropriate risk treatment procedures.
The word ‘organisational context’ encompasses the political, economic, social, technological, legal and ecological backdrop of the organisation.
It is simple for any management team to get internalised and end up forgetting that stakeholders will also be key participants in everyday business procedures, short-term projects and business-wide change programmes.
Comprehending the roles of person stakeholders and managing stakeholder participation is vital to effective. Stakeholders should, so far as is suitable, be advised of risks to some project or programme. Inside the context and stakeholder participation, “appropriate” concerns: the identity and role from the stakeholder, the amount of influence the stakeholder has over and outdoors from the organisation, the amount of investment the stakeholder has within the organisation, and also the type, probability and potential impact from the risk.
Risks exist only with regards to the activities and objectives of the organisation. Rain is really a negative risk for any picnic, an optimistic risk for drought-ridden farmland along with a non-risk for that occupants of the submarine.
It’s imperative the individual accountable for risk management (whether that’s the business leader, the workOrprogram manager or perhaps a specialist risk manager) understands the objectives from the organisation, to guarantee a tailored approach.
The processes, policies, strategies and plans inside the M_o_R framework provide generic guidelines and templates inside a particular organisation. The following tips derive from the knowledge and research of professional risk managers from an array of organisations and management backgrounds. Following best practices helps to ensure that individuals involved with handling the risks connected by having an organisation’s activity can gain knowledge from the mistakes, experiments and training of others.
Precisely and clearly representing data, and also the transmission of the data towards the appropriate staff people, managers and stakeholders, is vital to effective risk management. The M_o_R methodology provides standard templates and tested structures for handling the frequency, content and participants of risk communication.
Roles and responsibilities
Important risk management best practice may be the obvious meaning of risk management roles and responsibilities. Individual functions and accountability should be transparent, both within and outdoors a company. This will be significant both when it comes to organisational governance, and to make sure that all of the necessary responsibilities are handled by appropriate individuals.
An assistance structure may be the provision inside an organisation of standardised guidelines, information, training and funding for people managing risks that could arise in almost any specific area or project.
This could incorporate a centralised risk management team, a typical risk management approach and best-practice guidelines for reporting and reviewing organisational risks.
Early warning indicators
Risk identification is a vital initial step for removing or alleviating risks. In some instances, however, it’s not easy to remove risks ahead of time. Early warning indicators are pre-defined and quantified triggers that alert individuals accountable for risk management that the identified risk is imminent. This permits probably the most thorough and eager method of handling the problem.
Associated with the requirement for early warning indicators may be the review cycle. This establishes the standard overview of identified risks and helps to ensure that risk managers remain responsive to new risks, and also to the potency of current policies.
Overcoming barriers to M_o_R
Any effective strategy requires thoughtful thought on possible barriers to implementation. Common issues include:
o established roles, responsibilities, accountabilities and possession
o a suitable plan for embedding approach and transporting out activities
o sufficient and accessible training, techniques and tools
o risk management orientation, induction and training processes
o regular assessment of M_o_R approach (including the suggestions above issues)
Risk management underpins a variety of areas and facets of an organisation’s activity. A supportive culture is important for making certain that everyone with risk management responsibilities feels confident raising, discussing and managing risks. A supportive risk management culture may also include evaluation and reward of risk management competencies for that appropriate individuals.
Within an evolving organisation, nothing stands still. A highly effective risk management policy includes the capability for re-evaluation and improvement. In a practical level, this can require nomination of the individual or perhaps a group of people to down to making certain that risk management procedures and policies are up-to-date, along with the establishment of standard review cycles from the organisation’s risk management approach.