principles of risk - qualitative approaches

7/30/2019 Principles of Risk - Qualitative Approaches

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The Business School

The Business School

Principles of Risk

Risk Identification &

Qualitative Risk Analysis


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The Business School

The Business School

Some risk identification techniques

Checklists Risk interviews

Brainstorming

Stakeholder analysis Delphi method


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The Business School

The Business School

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 beestablished for common risks eg

personal safety, office health & safety,

IT/Construction projects, etc.


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The Business School

The Business School

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 asinitial 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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The Business School

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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The Business School

Stakeholder analysis (1)

Stakeholders are people, groups or organisations with

interests in a project orprogramme. [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 theirrelative level of interest

ie are they bothered!

from Johnson et al (2005)


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Stakeholder analysis (2)

Stakeholder

name

Interest or

concern

Assessment

of impact

Risk

management

L/M/H

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


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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

Drill down Cause & effect diagrams (Ishikawa)

Meta-language

Paired comparisons

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 ..


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Drill down

How dyou eat an elephant?

Dril l downis a technique for breaking complex problems intoprogressively 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.

In small parts of course


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The Business SchoolThe Business SchoolFishbone analysis (Ishikawa diagram)

A technique used to assist teams/groups to understand underlying causesonce these are identified and understood, we can seek solutions to

overcome or resolve it.

First used by Kaoru Ishikawa in the 1960s.

Issue?

Parents not

engaged

Dont respond to letters etcParents concerns notaddressed

Dont come to meetingsParents dont have a

+ve view of schools

adapted from NRT (2005)


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Meta-language

Underlying

circumstances

Uncertain

events

Effect

Source of

risk

Meta-language attemptsto put this relationship into

a clearly defined 3 part

statement:

As a result of , may

occur, which would lead

to


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Paired comparison analysis

Paired comparison analysiscan be used to assess the importance ofa number of options relative to each other. It is particularly usefulwhen you there are no objective data to base decisions on ithelps to set priorities when there are conflicting demands onresources.

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 mostimportant;

c) Assign a score to show how much more important it is;

d) Consolidate these comparisons so that each option is given apercentage importance.


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Paired comparison analysis

An entrepreneur is looking to expand his business. He identifies hisoptions as:

Expand into overseas markets Expand in home markets

Improve customer service Improve quality

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

Overseas (A) A2 C1 A1

Home (B) C1 B1

Customer (C) C2

Quality (D)


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NB: in mo re developed format = Analyt ical Hierarchy Process (AHP)

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?).


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Assessing the reality of risk

A company developing a elderly persons homes may identifythe 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 becomesimportant in preparing to manage risks

1. Occupancy rates lower than expected;

2. Failure to generate sufficient surplus to make interest payments;

3. Build quality is low compared to other available properties;4. Failure to assess demand from specific client groups

Shah (2003) HC Risk

Topic Paper No.5

This leads into quest ions about wh ich 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

principles of risk - qualitative approaches

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