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Risky Business. www.SteveNortonPMP.com 2 HopeIntentionality.

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Presentation on theme: "Risky Business. www.SteveNortonPMP.com 2 HopeIntentionality."— Presentation transcript:

1 Risky Business

2 2 HopeIntentionality

3 3 The Project Manager The client/customer – reluctant to waste money, time, and effort on Risk Management

4 ,000+ motorcyclists killed 1.2 million treated at Emergency Rooms ,502 motorcyclists killed Highest rates were among 20 – 24 year olds followed by 25 – 29 year olds

5 5 Motorcycle crash related injury and death totaled $12 Billion in 1 year in medical care costs and productivity losses Estimated annual costs saved from helmet use (medical, productivity) almost $400M in California

6 6 Helmets estimated to prevent 37% of crash deaths of motorcycle riders and 41% of crash deaths of passengers

7 7 Everything we do has risks Everything has potential payoffs We decide what is worth it Flight to Helena Risk of delay, crash, lost luggage Payoff in time and convenience

8 8 Reduced fuel costs Easier parking Fun Closer to nature Feels good Looks good

9 9 Crashes (2% of vehicles on road but motorcycles make up 10% of crashes) Injury (8 times more likely to be injured in a crash than in a car) Death (35 per 100M miles versus 1.7 in car) 37% of motorcycle fatalities involve speeding compared to 23% for cars

10 10 Situation Your 20 year old is planning to attend college out of state Also planning to get/ride a motorcycle

11 11 What could you do to manage risk? Talk them out of riding motorcycle Buy them nice safe car Educate them Buy them helmet and other PPE Send them to a state with helmet laws Buy insurance (comp, liability, medical)

12 12 What could you do to manage risk? (A) Talk them out of riding motorcycle (A) Buy them nice safe car (M) Educate them (M) Buy them helmet and other PPE (M) Send them to a state with helmet laws (T) Buy insurance (comp, liability, medical)

13 13 What were the costs for risk management related to your 20 year olds life? Price of a safe car Cost of helmet and other PPE Higher tuition rates Insurance premiums Time invested evaluating/purchasing Was it worth it?

14 14 Risk Management Planning is like buying insurance; you dont want to have to use it, but if you need it youre glad you did Recognizes uncertainty and provides forecasts of possible outcomes

15 15 There are 3 ways to look at it: If I crash, Ill be glad I spent the time and money If I dont crash, I could view it as wasted time and money and an inconvenience Or, I could view it as time and money well spent because even though I may not have needed it this time, I might next time…

16 16 Everything we do involves risk of some kind No company can make a profit or achieve its objectives without taking risks The person who risks nothing, does nothing, has nothing, and is nothing. Janet Rand

17 17 Given that we will take risks, the only questions are: Will we stick our heads in the sand and hope for the best? Or Will we intentionally manage them and cause the best outcome possible?

18 18 The same payoffs and risks exist regardless of the approach we take. Shall we influence the outcome or just wait and see what happens? Do we want to manage them or let them manage us?

19 19 Benefits of planning for risk events: Produces better business results through more informed decision making Improves cost and schedule estimating Contributes to project success Positive influence on creative thinking, innovation, and team building Helps senior management understand whats happening with the project and challenges it faces

20 20 Look at the various risk types including: Financial, product, intellectual property, liability, quality, customers, employees, personal injury, etc. Consider possible risk responses including: Avoid, mitigate, transfer, and accept (active or passive) Consider the possible opportunities to exploit Document the decisions and review them at agreed upon frequencies

21 21 Unpacking the Role Play What worked well for me was… What would have worked better for me was…

22 22 From: Whether or not to perform risk management activities (yes/no) To: Since we are taking risks, how shall we manage them and how much effort shall we expend? (what/how much)

23 Take these five steps to ensure risk is addressed: 1. Begin with mindset that you will address risks, its just a matter of how much effort is expended 2. Educate customer/client on the continuum of RM planning (reframe – what/how much) 3. Be prepared with 2 short personal examples (1 bad outcome, 1 good outcome) of RM planning 4. Show how easy and pain free managing risk can be 5. Show the potential benefits (of project specific RMP) on ongoing operations 23

24 E + R = O Event + Response = Outcome If you dont like the outcome you can: Complain about or blame the Event OR Change your Response to the Event 24

25 Start with the right mental attitude Knowing you can cash a check (good) Knowing insurance wont cover the damage (not so good) 25

26 Due Diligence The care that a reasonable person exercises to avoid harm to other persons or their property Research and analysis of a company or organization done in preparation for a business transaction (as a corporate merger or purchase of securities) 26

27 We will be taking risks, what steps and how much effort shall we expend? A Little A Lot Little: Cross the street Lot: Start up a nuclear facility 27

28 Cross the street – minimal effort done in head Risks include Busy – odds of being hit Police – odds of being caught Setting bad example – odds of somebody seeing me Payoffs include Avoid 30 yard walk to corner and back Avoid waiting for the light 28

29 Start up nuclear facility – significant effort that may include: Facilitated meetings, development of Risk Register, qualitative and quantitative analyses, risk response planning, monitor and control risk Engineered barriers, passive safety systems, active safety systems, administrative controls, minimum staffing levels, response times, preventive maintenance programs, safety class and safety significant systems, items important to safety classifications, etc. Note: In ,000 pedestrians injured and 4,280 were killed 29

30 One example of poor risk management planning outcome Modified Core Sample System (MCSS) project ($3M one year project) Initial high level RMP as part of $325M risk assessment Only revisited once in 3 years Significant changes in execution and acquisition strategies made during project without evaluating risks and opportunities Completed at $11M+ and 3 years 30

31 One example of adequate risk management planning outcome Slightly Irradiated Fuel Interim Storage Project ($25M 18 month fast track project) Two 3-hour initial facilitated risk and opportunities meetings with project team and stakeholders Approximately 30 risks and opportunities identified, quantified, addressed and tracked (quarterly) Many risks were realized and planned responses taken Completed on budget and schedule, won local Project of the Year Award Note: Approximately $65K/workday average project burn rate 31

32 Title and size of project Summary of scope What RMP was done for the project? How did that affect the project outcome? What message should be taken from this? 32

33 Be prepared to use a graded approach e.g. tailored to the project Low end could start with key team members and stakeholders for one – two hours High end should employ professional analysts and computer simulations Crawford Slip Method (CSM) simple but useful tool to identify risks 33

34 1. Explain the process (see handout) 2. Define the terms 3. Lay the ground rules 4. Pass out supplies 5. Ask the question (10 times at 1 minute intervals) Q: What risk is associated with…? A: X may happen and will result in Y 34

35 6. Evaluate answers Probability (H/M/L – likely, occasionally, not likely) Impact (H/M/L – 50% +/-, 20-50% +/-, <20% +/-) 7. Arrange responses in like groups 8. Name the categories 9. Identify next steps for building risk register and risk response planning 35

36 Some unused risk mitigation (e.g. spare parts or backup systems) can be moved into operations Evaluating project risks sometimes uncovers systemic organizational problems Going through the process helps those involved to see risks and opportunities in other areas Process can enhance team building 36

37 Take these five steps to ensure risk is addressed: 1. Begin with mindset that you will address risks, its just a matter of how much effort is expended 2. Educate customer/client on the continuum of RM planning (reframe – what/how much) 3. Be prepared with 2 short personal examples (1 bad outcome, 1 good outcome) of RM planning 4. Show how easy and pain free managing risk can be 5. Show the potential benefits (of project specific RMP) on ongoing operations 37

38 Additional steps that can be taken to make sure risk is addressed when the client and/or stakeholders dont want to invest in it include… 38

39 Steve Norton, PMP, MSPM


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