0:00:00.501,0:00:04.428 Okay, let's have a look at[br]risk management in practice 0:00:04.457,0:00:08.474 And what I want to do[br]is to start with some basic concepts 0:00:08.485,0:00:14.015 then focus on two difficult areas[br]in the risk process 0:00:14.242,0:00:19.164 So, I guess if I asked you[br]to define the word 'risk' 0:00:19.174,0:00:22.954 you would have some ideas[br]of what it meant 0:00:22.967,0:00:26.476 We might not have a formal definition[br]that we could quote, 0:00:26.476,0:00:30.253 but we all have something in our minds[br]when we hear the word 'risk' 0:00:30.274,0:00:33.972 This is what we think,[br]and maybe you think of things like this 0:00:34.234,0:00:38.534 Maybe you feel like this little guy,[br]facing some big ugly challenge 0:00:38.534,0:00:41.791 that you know is just going to[br]squash you flat. 0:00:42.066,0:00:43.766 Maybe you feel like this guy. 0:00:44.024,0:00:46.489 This is a real job in North Korea, 0:00:47.768,0:00:51.367 and his job is to hold the target[br]for other people to shoot at 0:00:51.500,0:00:53.979 Sometimes project managers[br]have the target here 0:00:54.292,0:00:56.911 We feel like everybody is shooting at us[br]in our job 0:00:57.757,0:01:01.987 Or maybe you just know there's something[br]nasty out there, waiting to get you 0:01:02.470,0:01:05.700 And maybe that's what you think of[br]when you think of the word 'risk' 0:01:06.361,0:01:09.574 Well that's partly true[br]but it's not the whole truth. 0:01:10.193,0:01:13.625 Risk is not the same[br]as uncertainty. 0:01:14.220,0:01:16.963 Risk is related to uncertainty[br]but they're different. 0:01:17.670,0:01:23.826 So all risks are uncertain[br]but not all uncertainties are risks. 0:01:24.653,0:01:27.589 If you have a risk register[br]or a risk list, 0:01:27.942,0:01:31.435 you don't have a million items in it,[br]or you shouldn't. 0:01:31.962,0:01:34.512 You don't even probably have[br]a thousand items in it, 0:01:34.512,0:01:35.788 you have a smaller number. 0:01:36.714,0:01:40.007 Although there are millions[br]of uncertainties in the world. 0:01:40.400,0:01:44.313 So how do we decide which uncertainties[br]we're going to call 'risk'? 0:01:44.677,0:01:47.280 And write them down [br]and put them in our risk register 0:01:47.548,0:01:50.057 and decide to do something about them. 0:01:50.483,0:01:56.362 Clearly 'risk' is a subset[br]of uncertainties, but which subset? 0:01:56.942,0:01:58.133 How do you know? 0:01:58.798,0:02:02.948 I think it's very simple to separate[br]risk and uncertainty. 0:02:03.199,0:02:05.274 And I used 3 English words, 0:02:05.425,0:02:10.019 these words here,[br]'risk is uncertainty that matters." 0:02:11.503,0:02:14.783 Because most of the[br]uncertainties in the world don't matter. 0:02:15.564,0:02:19.014 We don't care if it's going to rain[br]in London tomorrow afternoon. 0:02:19.400,0:02:23.780 It might, it might not,[br]it's irrelevant, it doesn't matter. 0:02:24.498,0:02:26.948 We don't care what the [br]exchange rate will be 0:02:26.948,0:02:30.703 if it's between the Russian Ruble [br]and the Chinese Yen in 2020. 0:02:30.703,0:02:32.387 It doesn't matter to us. 0:02:32.888,0:02:35.118 But there are things on our projects, 0:02:35.427,0:02:37.117 and things in our families, 0:02:37.271,0:02:38.871 and things in our country, 0:02:38.979,0:02:41.446 which are uncertain which do matter to us. 0:02:42.195,0:02:45.338 If it's an uncertainty that matters, [br]it's a risk. 0:02:46.188,0:02:49.991 So here's another question,[br]how do you know what matters? 0:02:50.751,0:02:53.396 In your projects, [br]what are the things that matter? 0:02:54.077,0:02:57.875 The things that matter in our projects[br]are our objectives. 0:02:58.532,0:03:02.216 So we must always connect uncertainty[br]with objectives, 0:03:02.991,0:03:05.631 in order to find the risks. 0:03:06.005,0:03:08.355 And if we look at [br]some definitions of risk, 0:03:08.361,0:03:11.405 this is the ISO standard that I mentioned, 0:03:11.445,0:03:13.796 it connects those words very simply. 0:03:13.796,0:03:17.559 Risk is the effect of uncertainty[br]on objectives. 0:03:18.451,0:03:21.201 And we might look at another definition[br]from the UK, 0:03:21.387,0:03:23.916 from our association [br]with project management, 0:03:24.144,0:03:28.134 it says the same thing that risk[br]is an uncertain event 0:03:28.152,0:03:32.212 or a set of circumstances, [br]which is uncertain, 0:03:32.212,0:03:35.372 but it matters because should it occur, 0:03:35.372,0:03:38.587 it will have an effect on achievement of objectives. 0:03:38.603,0:03:40.553 Uncertainty that matters. 0:03:40.867,0:03:44.317 So we should be looking [br]in our risk register for two things. 0:03:44.703,0:03:48.803 Is it uncertain? We don't want [br]problems in our risk register. 0:03:49.183,0:03:52.113 We don't want issues in the risk register. 0:03:52.113,0:03:55.020 We don't want constraints or requirements. 0:03:55.291,0:03:59.631 These things are certain,[br]what we want are uncertainties, 0:03:59.721,0:04:02.241 something that might happen[br]or might not happen. 0:04:03.076,0:04:06.766 But the other important question for our[br]risk register is 0:04:06.766,0:04:08.366 does it matter? 0:04:08.439,0:04:11.739 Which objective would be effective [br]if this thing happened? 0:04:13.304,0:04:15.810 And then when we want to see[br]how big the risk is, 0:04:16.160,0:04:18.322 we can ask those two questions: 0:04:18.338,0:04:19.768 how uncertain is it, 0:04:19.985,0:04:22.095 and how much does it matter? 0:04:22.132,0:04:24.502 And that will tell us how big the risk is. 0:04:24.564,0:04:27.044 So, this idea of uncertainty that matters 0:04:27.084,0:04:30.536 then develops into something which is useful 0:04:30.618,0:04:33.317 by linking uncertainty to our objectives. 0:04:34.767,0:04:37.148 So, we have two dimensions of ‘risk,’ 0:04:37.409,0:04:39.658 we have an uncertainty dimension and we 0:04:39.658,0:04:42.093 have a dimension that [br]affects our objectives 0:04:43.249,0:04:47.419 In projects, we call[br]these probability and impact, 0:04:47.449,0:04:49.502 We could call them other things, 0:04:49.502,0:04:51.413 there are other English 0:04:51.413,0:04:53.417 words we could use,[br]but these 0:04:53.417,0:04:55.082 are the ones,[br]most often, we use.