Risky Business. 2 HopeIntentionality.

Risky Business

HOW TO MANAGE RISK WHEN THE CUSTOMER DOESN’T WANT TO

www.SteveNortonPMP.com 2

TWO BASIC APPROACHES

Hope Intentionality

ROLE PLAY


The Project Manager

The client/customer – reluctant to “waste” money, time, and effort on Risk Management

CONSIDER THE RISKS


2001 - 2008 34,000+ motorcyclists killed

1.2 million treated at Emergency Rooms

2010 4,502 motorcyclists killed

Highest rates were among 20 – 24 year olds followed by 25 – 29 year olds

CONSIDER THE RISKS


Motorcycle crash related injury and death totaled $12 Billion in 1 year in medical care costs and productivity losses

Estimated annual costs saved from helmet use (medical, productivity) almost $400M in California

CONSIDER THE RISKS


Helmets estimated to prevent 37% of crash deaths of motorcycle riders and 41% of crash deaths of passengers

CONSIDER THE RISKS


Everything we do has risks

Everything has potential payoffs

We decide what is “worth it”

Flight to Helena Risk of delay, crash, lost luggage

Payoff in time and convenience

PAYOFF FOR RIDING MOTORCYCLE?


Reduced fuel costs

Easier parking

Fun

Closer to nature

Feels good

Looks good

RISKS OF RIDING MOTORCYCLE?


Crashes (2% of vehicles on road but motorcycles make up 10% of crashes)

Injury (8 times more likely to be injured in a crash than in a car)

Death (35 per 100M miles versus 1.7 in car)

37% of motorcycle fatalities involve speeding compared to 23% for cars

MANAGING RISK


Situation Your 20 year old is planning to attend

college out of state

Also planning to get/ride a motorcycle

MANAGING RISK


What could you do to manage risk? Talk them out of riding motorcycle

Buy them nice safe car

Educate them

Buy them helmet and other PPE

Send them to a state with helmet laws

Buy insurance (comp, liability, medical)

MANAGING RISK TERMINOLOGY


What could you do to manage risk? (A) Talk them out of riding motorcycle

(A) Buy them nice safe car

(M) Educate them

(M) Buy them helmet and other PPE

(M) Send them to a state with helmet laws

(T) Buy insurance (comp, liability, medical)

COST OF MANAGING RISK?


What were the costs for risk management related to your 20 year old’s life? Price of a safe car

Cost of helmet and other PPE

Higher tuition rates

Insurance premiums

Time invested evaluating/purchasing

Was it worth it?

COST OF MANAGING RISK?


Risk Management Planning is like buying insurance; you don’t want to have to use it, but if you need it you’re glad you did

Recognizes uncertainty and provides forecasts of possible outcomes

RM LIKE WEARING A HELMET


There are 3 ways to look at it:

If I crash, I’ll be glad I spent the time and money

If I don’t crash, I could view it as wasted time and money and an inconvenience

Or, I could view it as time and money well spent because even though I may not have needed it this time, I might next time…

RISK MANAGEMENT


Everything we do involves risk of some kind

No company can make a profit or achieve its objectives without taking risks

“The person who risks nothing, does nothing,

has nothing, and is nothing.”

Janet Rand

RISK MANAGEMENT


Given that we will take risks, the only questions are:

Will we stick our heads in the sand and hope for the best?

Or

Will we intentionally manage them and cause the best outcome possible?


MANAGING RISK

The same payoffs and risks exist regardless of the approach we take.

Shall we influence the outcome or just wait and see what happens?

Do we want to manage them or let them manage us?

BENEFITS


Benefits of planning for risk events: Produces better business results

through more informed decision making

Improves cost and schedule estimating

Contributes to project success

Positive influence on creative thinking, innovation, and team building

Helps senior management understand what’s happening with the project and challenges it faces

RECOMMENDATION


Look at the various risk types including:

Financial, product, intellectual property, liability, quality, customers, employees, personal injury, etc.

Consider possible risk responses including:

Avoid, mitigate, transfer, and accept (active or passive)

Consider the possible opportunities to exploit

Document the decisions and review them at agreed upon frequencies

END OF ROLE PLAY


Unpacking the Role Play What worked well for me was…

What would have worked better for me was…

REFRAME THE OPTIONS


From: Whether or not to perform risk management activities (yes/no)

To: Since we are taking risks, how shall we manage them and how much effort shall we expend? (what/how much)

MAKING SURE RISK ADDRESSED

Take these five steps to ensure risk is addressed:

1. Begin with mindset that you will address risks, it’s just a matter of how much effort is expended

2. Educate customer/client on the continuum of RM planning (reframe – what/how much)

3. Be prepared with 2 short personal examples (1 bad outcome, 1 good outcome) of RM planning

4. Show how easy and pain free managing risk can be

5. Show the potential benefits (of project specific RMP) on ongoing operations


#1 BEGINNING WITH RIGHT MINDSET

E + R = OEvent + Response = Outcome

If you don’t like the outcome you can: Complain about or blame the Event

OR Change your Response to the Event


#1 BEGINNING WITH RIGHT MINDSET (CONT.)

Start with the right mental attitude Knowing you can cash a check (good)

Knowing insurance won’t cover the damage (not so good)


#2 EDUCATE AND REFRAME

Due Diligence The care that a reasonable person

exercises to avoid harm to other persons or their property

Research and analysis of a company or organization done in preparation for a business transaction (as a corporate merger or purchase of securities)


#2 EDUCATE AND REFRAME (CONT.)

We will be taking risks, what steps and how much effort shall we expend?

A Little A Lot

Little: Cross the street

Lot: Start up a nuclear facility



Cross the street – minimal effort done in head Risks include

Busy – odds of being hit

Police – odds of being caught

Setting bad example – odds of somebody seeing me

Payoffs include Avoid 30 yard walk to corner and back

Avoid waiting for the lightwww.SteveNortonPMP.com 28


Start up nuclear facility – significant effort that may include: Facilitated meetings, development of Risk

Register, qualitative and quantitative analyses, risk response planning, monitor and control risk

Engineered barriers, passive safety systems, active safety systems, administrative controls, minimum staffing levels, response times, preventive maintenance programs, safety class and safety significant systems, items important to safety classifications, etc.

Note: In 2010 70,000 pedestrians injured and 4,280 were killed


#3 TWO SHORT PERSONAL STORIES

One example of poor risk management planning outcome Modified Core Sample System (MCSS)

project ($3M one year project) Initial high level RMP as part of $325M risk

assessment Only revisited once in 3 years Significant changes in execution and

acquisition strategies made during project without evaluating risks and opportunities

Completed at $11M+ and 3 years


#3 TWO SHORT PERSONAL STORIES

One example of adequate risk management planning outcome Slightly Irradiated Fuel Interim Storage

Project ($25M 18 month fast track project) Two 3-hour initial facilitated risk and opportunities meetings

with project team and stakeholders

Approximately 30 risks and opportunities identified, quantified, addressed and tracked (quarterly)

Many risks were realized and planned responses taken

Completed on budget and schedule, won local Project of the Year Award

Note: Approximately $65K/workday average project burn ratewww.SteveNortonPMP.com 31

PERSONAL STORY OUTLINE

Title and size of project

Summary of scope

What RMP was done for the project?

How did that affect the project outcome?

What message should be taken from this?


#4 MANAGING RISK DOESN’T NEED TO BE HARD

Be prepared to use a graded approach e.g. tailored to the project

Low end could start with key team members and stakeholders for one – two hours

High end should employ professional analysts and computer simulations

Crawford Slip Method (CSM) simple but useful tool to identify risks


CRAWFORD SLIP METHOD

1. Explain the process (see handout)

2. Define the terms

3. Lay the ground rules

4. Pass out supplies

5. Ask the question (10 times at 1 minute intervals)Q: “What risk is associated with…?”A: “X may happen and will result in Y”


CRAWFORD SLIP METHOD

6. Evaluate answersProbability (H/M/L – likely, occasionally,

not likely)

Impact (H/M/L – 50% +/-, 20-50% +/-, <20% +/-)

7. Arrange responses in like groups

8. Name the categories

9. Identify next steps for building risk register and risk response planning


#5 POTENTIAL BENEFITS TO ONGOING OPERATIONS

Some unused risk mitigation (e.g. spare parts or backup systems) can be moved into operations

Evaluating project risks sometimes uncovers systemic organizational problems

Going through the process helps those involved to see risks and opportunities in other areas

Process can enhance team building www.SteveNortonPMP.com 36

SUMMARY

Take these five steps to ensure risk is addressed:

1. Begin with mindset that you will address risks, it’s just a matter of how much effort is expended

2. Educate customer/client on the continuum of RM planning (reframe – what/how much)

3. Be prepared with 2 short personal examples (1 bad outcome, 1 good outcome) of RM planning

4. Show how easy and pain free managing risk can be

5. Show the potential benefits (of project specific RMP) on ongoing operations


SUMMARY

Additional steps that can be taken to make sure risk is addressed when the client and/or stakeholders don’t want to invest in it include…


CONTACT INFORMATION

www.SteveNortonPMP.com

Steve Norton, PMP, MSPM

509-430-1690Steve@SteveNortonPM

P.com

39

Risky Business. 2 HopeIntentionality.

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Transcript of Risky Business. 2 HopeIntentionality.