The 5 Principles Underlying the Definition of Risk

Risk Management requires you to continuously analyze risk and analyze for relative importance.  Project risk management means to identify and assess the risks, plan responses and taking the appropriate action.    

4 Common Methods for Risk Analysis:

1. Expected Value
2. Decision Trees
3. Payoff Tables
4. Simulation

The 5 Principles Underlying the Definition of Risk:

1. There are many risk in a project. All uncertainty in a project plan that you can control or track is considered a risk.  The risks that will make or break the project; the critical risks must be identified.  When a project or project task is completed in spite of a risk this is is called 'overcoming a risk."  Overcoming a risk creates opportunity. On the other side of risk lies opportunity.

2. Address risk by continuously looking for ways things can go wrong in "defining and scheduling work." Risk is primary to an organization and a project it is  not separate from management. All projects equal risk without risk a project would not exist.  "Risk is why you do business and plan projects" 

3. Focus on the high-risk and task that consume resources.  Rank-order risks helps you to assess risk and keep the risk under a microscopic telescope.
 

4. Monitor risks - Identify key risk milestones or points in project milestones where key decisions must be made. Milestones indicate if a equipment worked or didn't work, if a major resource was available, or a "key technology in new product worked as designed."

5. Plan a response to risk will require an understanding of the project and impacts of different corrective actions. Create risk scenarios and schedule impacts.  "Expected" scenario is the best guess at what actually will happen.  "Pessimistic" scenario is the worst case and a "Optimistic " scenario is the best case.

Risk are identified from experience from past projects and careful assessment of current projects. Projects have many risks, however the important ones must be addressed. Importance would depend on the likelihood, impact and overall risk consequence. Likelihood is the probability a risk will occur which should be determined by experienced people. Risk impact would be the effect of the risk and how vital or the influence it may have on project schedule, cost or performance outcomes. Risk consequences would be a combination of both likelihood and impact. (View the two concepts as one) Risk consequence measures determine which risks should be addressed or ignored. As a rule, all risks with severe impact should be closely examined even when the likelihood of the occurrence is small.

 Karen Callier

 References:
(Barkley, 2004 p. 3).
(Nicholas, Steyn, 2008 p. 388).

Risk and uncertainty: How does risk differ from uncertainty?

Every project has events or circumstances that must not occur for a project to be successful. Project outcomes can result from things that are unpredictable in which project managers may have little control. Risk level is associated with the certainty level about technical, schedule and cost outcomes. High-certainty outcomes have low risk; low-certainty outcomes have high risk. Certainty derives from knowledge and experienced gained in prior projects and management's ability to control project outcomes and respond to problems that emerge.

Risk is the function of a project uniqueness and the experience of the project team. When activities have been performed many times outcomes can be anticipated and  aspects of the project  plan manipulated to achieve desired outcomes. However, when a project is unique or has an inexperienced team, the outcomes are more uncertain and makes it difficult to anticipate and avoid problems. Routine projects also have risk because outcomes may be caused by new and emerging factors or it may beyond anyone's control.

Project risk involves

1. The "likelihood" that some problematic event will occur

2. The "impact" of the event if it does occur

Risk is a joint venture of the two. Risk = f(likelihood, impact)

The Software Engineering Institute defines risk management as "A successful risk management practice is one in which risks are continuously identified and analyzed for relative importance.  Risks are mitigated and tracked and controlled to effectively use programs resources. Problems are prevented before they occur and personnel consciously focus on what could affect product quality and schedules."

This definition describes a process of the entire project life cycle and addresses project team members thoughts and actions in the planning and organizing process.  I will provide the 5 principles that underlie the risk definition in my next entry. 

Karen Callier

References:

(Nicholas, Steyn, 2008 p. 363).

(Barkley, 2008 p. 3).

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Quality is Vital for Long-Term Success

 Quality; the achievements or excellence of an object, product, project or which meets customer needs. The purpose of managing quality on a project is to first understand exactly what the client's perception of quality is. Once you have an understanding a plan can be deployed with quality control and quality assurance activities to ensure client's expectations are met. There are many measurement scales, one for each of the characteristics the customer considers important. On the other hand, Juran defines quality as "fitness for use," with each product having multiple quality characteristics of two kinds: customer-desired product features and freedom from deficiencies. While both Deming's and Juran's definitions are customer-oriented, they are not easily used in gaining customer input to the quality improvement process. Crosby, operational, he defines quality as "conformance to requirements," because a set of specifications can often be created that define the product from the viewpoint of the customer, serving as a de facto means of feedback. If the product meets those specifications, it conforms to requirements; therefore, for Crosby, the ideal is "zero defects" or meeting the specifications 100% of the time. The 3 determinants of profitability are productivity, cost and quality.

Quality is the most significant in long-term success of an organization. High quality products and services can provide a company with a competitive advantage. High quality reduces cost from returns, rework and scrap. Quality increases, productivity and profits. High quality generates customer satisfaction as a result. In the long run sustainable competitive advantage provides superior performance. It is driven by what a customer want and needs. Value given that rivals can not imitate. Effective use of resources; a match between the organization's resources with opportunities in the environment. Management can avoid using time and resources on the problems that arise by being involved at the pre-project stage. This will allow them to minimize risk early and make better decisions in the event problems do arise during the life cycle of a project.

In order for a company to develop a strong corporate cultures, I believe there must be a widely shared philosophy. Employees must be exposed to what the firm stands for. The firm's mission needs to be specified an articulated throughout the organization. Organizations must adhere to its rules and policy mandates should put people ahead of them. Employees when tend to be more loyal and accepting of the culture when they feel they are included and important . Every company has heroes who have gone beyond expectations. Companies that have strong company cultures ensure the stories of those company heroes are well known throughout the organization. Employees must understand the rituals and ceremonies that are important a firm's identity. Maintaining and improving these rituals helps firms maintain a strong corporate culture. Informal rules and expectations must be obvious so that employees understand what is expected of them and the organization. Employees must realize that their work is important and their work and knowledge should be networked throughout the company. A good communication system in the company, enhances company's culture A high performance organization has a continuous improvement with a commitment to learning and understanding the meaning, management and measurement of learning. A learning organization fosters an environment of a commitment to teamwork, consistency, routine measurement and analysis and training and continuous development for all employees.

by Karen Callier