3.10 Risk Framework

A risk framework outlines the organization’s:

  • risk management approach
  • risk appetite
  • risk tolerance
  • accountabilities and responsibilities for managing risk.

In today’s world organizations should constantly reassess and update their framework – as frequently as weekly, or even daily. Organizations that are proactively managing their risk, controls and compliance activities will potentially be better positioned to respond to change e.g. businesses fast-tracked their digitization process in 2020, to enable effective remote working and ecommerce.

The hallmarks of a good risk management framework are: pragmatism, flexibility, informed decision-making and ecosystem connectedness.

Key Takeaways

  • Uncertainty is about a state of not knowing or unpredictability and there are many degrees of uncertainty:
    • Risk – Associated with not knowing future events.
    • Ambiguity – Associated with not being aware of current or future conditions.
    • Complexities- Associated with dynamic systems having unpredictable outcomes.
    • Volatility – Associated with rapid and unpredictable change.
  • Project risk is an uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives such as scope, schedule, cost, procurement and quality.
  • An individual risk are specific events or conditions that might affect project objectives, elements or task.
  • Overall project risk represents the effect of uncertainty on the project as a whole.
  • Risk attitudes of the stakeholders determine the extent to which an individual risk or overall risk matters.
  • Risk management focuses on identifying and assessing the risks to the project and managing those risks to minimize the impact on the project.
  • Risk Management Processes has six steps in the process:
    • Planning Risk Management Process
    • Identifying the Risks
    • Perform Qualitative Risk Assessment
    • Perform Quantitative Risk Assessment
    • Developing Risk Responses
    • Monitoring and Control Risks
  • The risk management plan identifies the processes and procedures to be used in managing risk throughout the life of the project.
  • A risk breakdown structure (RBS) can follow the work breakdown structure (WBS) to identify risk by activity.
  • Contingency planning is the development of alternative plans to respond to the occurrence of a risk event.

License

Managing Project Costs, Risks, Quality and Procurement Copyright © by Florence Daddey. All Rights Reserved.

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