Okay, let's have a look at
risk management in practice

And what I want to do
is to start with some basic concepts

then focus on two difficult areas
in the risk process

So, I guess if I asked you
to define the word 'risk'

you would have some ideas
of what it meant

We might not have a formal definition
that we could quote,

but we all have something in our minds
when we hear the word 'risk'

This is what we think,
and maybe you think of things like this

Maybe you feel like this little guy,
facing some big ugly challenge

that you know is just going to
squash you flat.

Maybe you feel like this guy.

This is a real job in North Korea,

and his job is to hold the target
for other people to shoot at

Sometimes project managers
have the target here

We feel like everybody is shooting at us
in our job

Or maybe you just know there's something
nasty out there, waiting to get you

And maybe that's what you think of
when you think of the word 'risk'

Well that's partly true
but it's not the whole truth.

Risk is not the same
as uncertainty.

Risk is related to uncertainty
but they're different.

So all risks are uncertain
but not all uncertainties are risks.

If you have a risk register
or a risk list,

you don't have a million items in it,
or you shouldn't.

You don't even probably have
a thousand items in it,

you have a smaller number.

Although there are millions
of uncertainties in the world.

So how do we decide which uncertainties
we're going to call 'risk'?

And write them down 
and put them in our risk register

and decide to do something about them.

Clearly 'risk' is a subset
of uncertainties, but which subset?

How do you know?

I think it's very simple to separate
risk and uncertainty.

And I used 3 English words,

these words here,
'risk is uncertainty that matters."

Because most of the
uncertainties in the world don't matter.

We don't care if it's going to rain
in London tomorrow afternoon.

It might, it might not,
it's irrelevant, it doesn't matter.

We don't care what the 
exchange rate will be

if it's between the Russian Ruble 
and the Chinese Yen in 2020.

It doesn't matter to us.

But there are things on our projects,

and things in our families,

and things in our country,

which are uncertain which do matter to us.

If it's an uncertainty that matters, 
it's a risk.

So here's another question,
how do you know what matters?

In your projects, 
what are the things that matter?

The things that matter in our projects
are our objectives.

So we must always connect uncertainty
with objectives,

in order to find the risks.

And if we look at 
some definitions of risk,

this is the ISO standard that I mentioned,

it connects those words very simply.

Risk is the effect of uncertainty
on objectives.

And we might look at another definition
from the UK,

from our association 
with project management,

it says the same thing that risk
is an uncertain event

or a set of circumstances, 
which is uncertain,

but it matters because should it occur,

it will have an effect on achievement of objectives.

Uncertainty that matters.

So we should be looking 
in our risk register for two things.

Is it uncertain? We don't want 
problems in our risk register.

We don't want issues in the risk register.

We don't want constraints or requirements.

These things are certain,
what we want are uncertainties,

something that might happen
or might not happen.

But the other important question for our
risk register is

does it matter?

Which objective would be effective 
if this thing happened?

And then when we want to see
how big the risk is,

we can ask those two questions:

how uncertain is it,

and how much does it matter?

And that will tell us how big the risk is.

So, this idea of uncertainty that matters

then develops into something which is useful

by linking uncertainty to our objectives.