Risk management basics: What exactly is it?

Summary

This script simplifies risk management into six intuitive questions that anyone can ask in any situation: What are we trying to achieve? What might affect us? Which are the most important risks? What should we do about them? Did our actions work? What has changed? By addressing these questions, risk management becomes a natural and straightforward process, applicable to both personal and organizational decisions, without the need for complex statistics or bureaucracy.

Takeaways

• 🎯 Risk management is a fundamental and natural process that involves asking and answering six basic questions.
• 📍 The first step in risk management is to define objectives, understand the scope, and set the context for managing risk.
• 🔎 Risk identification involves finding uncertainties that could affect the achievement of goals, both positively and negatively.
• 📊 Risk assessment is about prioritizing risks based on their likelihood of occurrence and potential impact on goals.
• 🛠 The fourth question focuses on developing responses to identified risks, which could include avoiding, minimizing, maximizing, or exploiting them.
• 🔄 Implementing the planned responses is crucial, followed by evaluating whether these actions were effective.
• 🔄 Continuous monitoring and evaluation are necessary to adjust approaches and identify new risks as projects and environments change.
• 🔄 The process of risk management is iterative and dynamic, requiring regular reassessment to adapt to new information and circumstances.
• 📝 While risk management can be applied with various levels of detail and tools, the core remains the same set of six intuitive questions.
• 🌐 These questions are universally applicable, regardless of the complexity or scale of the project, from personal decisions to large-scale endeavors.

Q & A

What is the speaker's perspective on risk management?

The speaker believes that risk management is a natural and important process that involves asking and answering six basic questions, rather than being a complex and difficult task involving probability and statistics.

What are the six basic questions of risk management according to the speaker?

The six basic questions are: 1) What are we trying to do? 2) What might affect me? 3) Which of those things that might affect me are most important? 4) What should we do about it? 5) Did it work? 6) What changed?

Why is the first question 'What are we trying to do?' important in risk management?

This question is crucial as it sets the objectives, understanding the scope, context, and environment within which risk management takes place, which is the first step in the risk process.

How does the second question 'What might affect me?' lead into risk identification?

This question prompts the identification of uncertainties and future events that could either hinder or help in achieving goals, which is the second step in the risk process.

What is the purpose of the third question 'Which of those things that might affect me are most important?'

This question helps in prioritizing the identified uncertainties by assessing their likelihood and potential impact on goals, both positive and negative.

What does the fourth question 'What should we do about it?' encourage?

It encourages proactive responses to identified risks, such as avoiding, minimizing, or protecting against bad risks, and maximizing or exploiting good risks.

Why is the fifth question 'Did it work?' significant in the risk management process?

This question is significant as it involves evaluating the effectiveness of the planned risk responses and adjusting the approach if necessary.

How does the sixth question 'What changed?' relate to the dynamic nature of projects?

This question acknowledges the constant changes in projects and business, emphasizing the need to identify new risks and adapt the risk management approach accordingly.

What does the speaker suggest about the complexity of risk management processes?

The speaker suggests that risk management does not need to involve bureaucracy, forms, or complex statistics, but can be a natural process of asking and answering important questions.

How can the six questions be applied to different scales of projects?

The speaker indicates that whether it's a complex project like putting a man on the moon or a simple task like moving across an office, the same six questions apply, and they can be applied at a more detailed level with additional tools and templates for larger projects.