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..don’t base the business on a roll of the dice!
Risk taking in business is inevitable as Strategic Planning and Project Implementation are enables of change – and change induces uncertainty and hence risk.
Risk Management should be systematic and not based on chance. It is about pro-
A risk is an uncertain event or set of events that, should it occur, will have an effect on achieving the objectives. It consists of a combination of the probability of a perceived threat or opportunity occurring and the magnitude of its impact on objectives, where:-
Threat – an uncertain event that could have a negative impact on the objectives
Opportunity – an uncertain event that could have a favourable impact on the objectives
In the context of a project, ongoing BAS [Business as Usual] or a well defined Strategic Plan – it is the following indicators that are at risk, i.e.
Time : Cost : Quality : Scope : Benefit : Risk
With the key metrics [KPIs] under threat of change due to risk and uncertainty, 2m-
This information is then invaluable when assessing Strategic Plans, Operational Change, Programme and Project investment decisions.
Monte Carlo scheduling of a plan with risk analysis helps to determine the impact of risks and uncertainties on the schedule. Risks can be quickly linked to activities, generating a risk adjusted project schedule.
Sensitivity analysis leads to ranking of risks within a risk register, leading to probabilistic output from the initial deterministic plan.
Subsequent reviews and analysis enable sensitivity analysis and probabilistic forecasts on actual project costs and end dates – allowing the Client to make appropriate previsions in contingency – both in terms of likely full costs and forecast completion – and thus timings for ROI, project new cash flows and income generation.
Information is key to understanding the risks, assessing probabilities and impact and the subsequent development of mitigation plans.
Risk Analysis : Distribution and Forecasts for Cost and Schedule