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RISK Culture. Lecture 1. Risk Thinking. What make us to think for a risk: Is it a backward thinking or forward thing? Will it allow us to grow and progress or slow us down? In Growth-oriented management cultures of the past, negative aspects were not mentioned.
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RISK Culture Lecture 1
Risk Thinking • What make us to think for a risk: • Is it a backward thinking or forward thing? • Will it allow us to grow and progress or slow us down? • In Growth-oriented management cultures of the past, negative aspects were not mentioned. • In those days, to reflect upon failure was a sign of failure.
Risk Thinking • Thinking of failure came into management paradigms through different avenues: • Fail safe product: • The market demanded fail-safe product. • Product forced to look at failure possibilities and came up with robust design. • Developers should design a product with minimum risks.
Risk Thinking • Finance Management: • Risk became a investment question. • Credit risk is studied, defined and measured religiously in finance institutions. • “Variation in ROI” was a measure of risk, as old-age concept was “Variation is trouble” • Project Management: • Risk consideration became a integral part of PM. • Project managers saw risks clearly than anybody else. • Managing a project implied living with risk around the clock.
What is Risk? • The original meaning of a risk is gambling: • “to risk is to gamble” • Take risks is equal chance of gaining and equal chance of losing • Definition 1: “Risk is a probability of suffering loss ” • Definition 2: “Risk is a probability of suffering loss while pursing goals”
What is Risk? • Definition 3: “Risk is the combination of probability and magnitude of loss” • Definition 4: “Risk is a probability of suffering loss while pursuing goals due to factors that are unpredictable or beyond”
A boundary Problem • What is a Risk? • Answer to this depends upon on who is answering it • And the boundaries the individual establishes around himself • Owner Vs Non-owner
Expressing Risk • Cultures are propagated through words, so • Risk cultures also thrives on clear definition of risk terms. • Basic Terms: • Risk ID • Risk Probability • Risk Impact • Risk Exposure • Risk Origin • Risk Category • Risk Owner
Expressing Risk • Additional Terms: Following may also be added in list to minimize risks, • Risk Cost • Risk Cause
Risk Vocabulary • In building risk cultures, it is essential to : • share the glossary with all decision makers • And achieve common terms of reference • Will avoid differences in interpretations, • because difference even if they are small, causes conflict and disagreement. • Each organization should publish its own definitions and make them known to all stakeholders.
Risk Driven Project Management • Project Visibility: • Risk eclipse all project, more in case of Software projects. • With abstract work projects and indescribable results, are more vulnerable to risks. • So good road to visibility prevents accidents, • So visibility in projects reduces risks • Process maturity improves visibility and minimize risks.
Risk Driven Project Management • Goals Setting: • Every goal is shadowed by risks, so when to define goals, must recognize risks too. • Risk sensitivity enhances goal clarity. • Great opportunities, that others missed, result in only by taking risks. • More knowledge less risks, and vice-versa. • Successful entrepreneurs are tuned with risks, they perceive risks and deal them.
Risk Driven Project Management • Product Development: • Product development companies are fearful about risks. • Their Stakes & Investments are huge and • Several risks threatens the product before it hits the market • Products may be scrapped prior to release because • Market for them may disappear • Lack of right people for maintain product. • If competitors launch product ahead of us, than we lost time and with it, no race. • Risk are carefully examined at every milestone in product development environment.
Risk Driven Project Management • Development: • Risk Driven approaches are known to pay rich Surplus but, • Phase-end risk reviews and appropriate responses enables smooth sail. • Project team looks at risks, handle them, or escalate the risk to higher level involvement. • The evolutionary development model exposes risks clearly at every increments. • Project reviews at increments are ideally suits to detect risks and acting at them
Risk Driven Project Management • Maintenance: • Maintenance projects needs risk management. • Because they go through routine & repetitive bug-fixing cycle. • Risk management reduces cycle time and improves customer satisfaction. • Instead of Life-cycle based risk approaches, Calendar-based regular risk reviews are more useful.
Maturity in Risk Culture • As the risk matures the paradigm shifts. • Previously known risk are attack in crisis management. • With experience, internal risks are mitigate, and external risk are engaged in reasonable order. • Larger problems are solved using long-term strategies. • It is the time when risks are exploited, they are solved & associated opportunities are seen with clarity.
Maturity in Risk Culture • When risk awareness is respected , there may be many risk owners. • Because these employees own the risk as they affect their goals and objectives. • Decision Analysis practitioners take risk analysis in their pace. • Considers risk & payoffs in decisions to make optimum & least harmful options. • Mature organization possesses prediction models, & risk forecasting became an obvious output. • It also Stimulate variation and risks.
Maturity in Risk Culture • Growth Architects of an organization hunts for opportunities; • Their caution is risk prevention, hence risk perceiving & responding will pave path for growth. • An organization that doesn’t see is blind & the one that doesn't respond to them are dead.
Maturity in Risk Culture Maturity Phases of Risk management Culture
Maturity in Risk Culture • Mature risk cultures absorb an ability to perceive & solve risks with speed & energy. • The frequent sharing of risk information, exchange of success & failures in risk mitigation has a major significant that • it cultivates a sixth sense of risk, from risk data to risk practices. • Risk cultures has power to see unknown risks, but maturity involves years of practices.
Preparing for Risk • People: • If starting for risk management, then prepare the organization for it. • All decision makers should have the common definition of risk & will interpret the meaning in identical manner. • Decision maker can be: • Directors, • Senior Managers, • Project Leaders, • Team Leaders, • Engineers. • Begin the preparation with HR List and organization Structure. • Make sure who should contribute to risk management and how.
Preparing for Risk • Communication: • Arranged list refers to the risk owners in your organization, as they are also decision makers. • Prepare the Risk management guidelines & circulate them. • All the identified decision makers have a common understanding of following: • Risk Glossary, • Risk Management, • Risk management Benefits, • Distinction between the risks and defects, • Risk base project development,
Preparing for Risk • Body of knowledge: • Risk management is a knowledge based, so • Develop a risk body of knowledge and publish the best practices, resulting from risk mitigation. • Metrics: • Are program of particular support to risk management. • It’s a system of seeing, observing & judging, • Expected to spot troubles & alert the stakeholders. • Metrics data could contain risk signals that can uncovered by analysis.
Preparing for Risk • Estimation Models: • Have basic potential to predict risks. • Collect all estimation processes that are circulated • & include a risk forecast in the scope • Detailed Planning: • A certain level of depth & detail is an essentialto flourish • Plan provide a neat & clean foil against risk to see them with ease. • Plans provide a clear and noise free mental landscape that can expose risk
Preparing for Risk • Effective Defect management: • To manage the unknown risk & problems, • Firstly you need to manage known problems, once they are controlled, unknown problems will be less likely to address. • Defect management techniques can be adopted for effective risk management. • The economical benefits achieved defect management will motivate employees to further gains through RM.
