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Okay, let's have a look at
risk management in practice
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And what I want to do
is to start with some basic concepts
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then focus on two difficult areas
in the risk process
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So, I guess if I asked you
to define the word 'risk'
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you would have some ideas
of what it meant
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We might not have a formal definition
that we could quote,
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but we all have something in our minds
when we hear the word 'risk'
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This is what we think,
and maybe you think of things like this
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Maybe you feel like this little guy,
facing some big ugly challenge
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that you know is just going to
squash you flat.
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Maybe you feel like this guy.
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This is a real job in North Korea,
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and his job is to hold the target
for other people to shoot at
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Sometimes project managers
have the target here
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We feel like everybody is shooting at us
in our job
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Or maybe you just know there's something
nasty out there, waiting to get you
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And maybe that's what you think of
when you think of the word 'risk'
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Well that's partly true
but it's not the whole truth.
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Risk is not the same
as uncertainty.
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Risk is related to uncertainty
but they're different.
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So all risks are uncertain
but not all uncertainties are risks.
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If you have a risk register
or a risk list,
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you don't have a million items in it,
or you shouldn't.
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You don't even probably have
a thousand items in it,
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you have a smaller number.
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Although there are millions
of uncertainties in the world.
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So how do we decide which uncertainties
we're going to call 'risk'?
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And write them down
and put them in our risk register
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and decide to do something about them.
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Clearly 'risk' is a subset
of uncertainties, but which subset?
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How do you know?
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I think it's very simple to separate
risk and uncertainty.
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And I used 3 English words,
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these words here,
'risk is uncertainty that matters."
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Because most of the
uncertainties in the world don't matter.
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We don't care if it's going to rain
in London tomorrow afternoon.
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It might, it might not,
it's irrelevant, it doesn't matter.
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We don't care what the
exchange rate will be
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if it's between the Russian Ruble
and the Chinese Yen in 2020.
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It doesn't matter to us.
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But there are things on our projects,
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and things in our families,
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and things in our country,
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which are uncertain which do matter to us.
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If it's an uncertainty that matters,
it's a risk.
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So here's another question,
how do you know what matters?
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In your projects,
what are the things that matter?
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The things that matter in our projects
are our objectives.
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So we must always connect uncertainty
with objectives,
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in order to find the risks.
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And if we look at
some definitions of risk,
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this is the ISO standard that I mentioned,
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it connects those words very simply.
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Risk is the effect on uncertainty
on objectives.
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And we might look at another definition
from the UK,
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from our association
with project management,
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it says the same thing that risk
is an uncertain event
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or a set of circumstances,
which is uncertain,
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but it matters because should it occur,
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it will have an effect on achievement of objectives.
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Uncertainty that matters.
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So we should be looking
in our risk register for two things.
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Is it uncertain? We don't want
problems in our risk register.
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We don't want issues in the risk register.
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We don't want constraints or requirements.
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These things are certain,
what we want are uncertainties,
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something that might happen
or might not happen.