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Principles of Risk
Risk Identification &

Qualitative Risk Analysis

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Some risk identification techniques

Checklists Risk interviews Brainstorming Stakeholder analysis Delphi method

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Checklists
Certain types of risk, or risk settings, have some level of communality we know from past experience what are some of the most common risk elements and patterns. These might vary in detail and in impact/probability, but we know they need to be considered.
So a checklist/prompt list can often be established for common risks eg personal safety, office health & safety, IT/Construction projects, etc.

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Risk interviews
Interviews provide a means of gathering key information, often from key personnel and in a way that allows for greater self-expression. As well as initial risk identification, interviews can be useful in:
assessing & reviewing risk elements;
assessing potential data sources and constraints for subsequent quantitative analysis

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Brainstorming (thought showers)
Brainstorming is a creativity technique based on original work by Alex Osborn in the late 1940s (published in 1953)
Typical rules of brainstorming are:
Encourage wide participation cross-team and multi-layered representation; Look for quantity in initial stages in-depth analysis is for later; Encourage gradual development participants build on ideas of others; Prohibit overt criticism encourage and defer judgement

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Stakeholder analysis (1)
Stakeholders are people, groups or organisations with interests in a project or programme. [APM, 2004, p.131]
Primary stakeholders are those directly affected; Secondary stakeholders are those who may have an indirect influence over a project or programme
Key issues are the extent to which they can exert power over a project and/or their relative level of interest ie are they bothered!
from Johnson et al (2005)

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Stakeholder analysis (2)
The aim is to create a log of stakeholders interests and concerns, which help both identify risks and provide leads into the subsequent management of those risks

Stakeholder name

Interest or concern

Assessment Risk of impact management

L/M/H

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Delphi method
Based on expert analysis in the classic format, acknowledged experts are interviewed without knowledge of the others involvement to avoid groupthink influences.
After an initial round of interrogations the pattern is repeated to seek out further views or information and establish patterns. Examples: Select Committees (UK Govt); Overview and Scrutiny Committees (UK Local Govt).

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Some qualitative risk analysis techniques
The essence of qualitative risk analysis is to help develop effective approaches to risk management and in this, the most effective means is to identify what generates a given risk. So several of the analytical approaches are to understand risk at source ..

Drill down
Cause & effect diagrams (Ishikawa) Meta-language Paired comparisons

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Drill down
How dyou eat an elephant? In small parts of course
Drill down is a technique for breaking complex problems into progressively smaller parts. Then consider what factors contribute to the problem as the next level of the problem; then the next; then the next; etc. This is drilling into a problem to help find the root cause(s), or key influencers.

Fishbone analysis (Ishikawa The Business Schooldiagram)


A technique used to assist teams/groups to understand underlying causes once these are identified and understood, we can seek solutions to overcome or resolve it.
First used by Kaoru Ishikawa in the 1960s.
Parents concerns not addressed Dont respond to letters etc

Issue?
Parents not engaged

Parents dont have a +ve view of schools

Dont come to meetings

adapted from NRT (2005)

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Underlying circumstances

Source of risk

Metalanguage
Meta-language attempts to put this relationship into a clearly defined 3 part statement: As a result of <fact>, <uncertain events> may occur, which would lead to <effect>

Uncertain events

Effect

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Paired comparison analysis
Paired comparison analysis can be used to assess the importance of a number of options relative to each other. It is particularly useful when you there are no objective data to base decisions on it helps to set priorities when there are conflicting demands on resources. The process is: a) Compare each option with each other option, one-by-one; b) For each comparison, decide which of the two options is most important; c) Assign a score to show how much more important it is; d) Consolidate these comparisons so that each option is given a percentage importance.

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Paired comparison analysis
An entrepreneur is looking to expand his business. He identifies his options as: Expand into overseas markets Expand in home markets Improve customer service Improve quality

Overseas (A) Overseas (A)

Home (B) A2

Customer (C) C1

Quality (D) A1

Home (B)
Customer (C) Quality (D)

C1

B1
C2

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Then add up each value ie A, B, etc and convert to a % of total: A=3 (37.5%);

B=1 (12.5%);
C=4 (50%); D=0(0%). Customer service (C) is decision (or primary risk area?).
NB: in more developed format = Analytical Hierarchy Process (AHP)

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Assessing the reality of risk
A company developing a elderly persons homes may identify the following risks relating to income/revenue flows.
The question is how do these risks inter-relate? and in what order do they impact? The assessment becomes important in preparing to manage risks
1. 2. 3. 4. Occupancy rates lower than expected; Failure to generate sufficient surplus to make interest payments; Build quality is low compared to other available properties; Failure to assess demand from specific client groups
Shah (2003) HC Risk Topic Paper No.5

This leads into questions about which of these we can manage [exercise]

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References
APM (2006) APM Book of Knowledge APM (2004) Project risk analysis and management guide (PRAM)

Baker S & Baker K (2000) A complete idiots guide to project management Alpha
Borge (2001) The book of risk Wiley Buttrick R (2005) The project workout (3rd Edition) Prentice Hall HM Treasury (2004) The Orange Book: Management of risk principles and concepts

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