Risk management basics: What exactly is it?
Summary
TLDRThis 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
- π― Risk management is a fundamental and natural process that involves asking and answering six basic questions.
- π The first step in risk management is to define objectives, understand the scope, and set the context for managing risk.
- π Risk identification involves finding uncertainties that could affect the achievement of goals, both positively and negatively.
- π Risk assessment is about prioritizing risks based on their likelihood of occurrence and potential impact on goals.
- π The fourth question focuses on developing responses to identified risks, which could include avoiding, minimizing, maximizing, or exploiting them.
- π Implementing the planned responses is crucial, followed by evaluating whether these actions were effective.
- π Continuous monitoring and evaluation are necessary to adjust approaches and identify new risks as projects and environments change.
- π The process of risk management is iterative and dynamic, requiring regular reassessment to adapt to new information and circumstances.
- π While risk management can be applied with various levels of detail and tools, the core remains the same set of six intuitive questions.
- π 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.
Outlines
π Risk Management Simplified
The speaker challenges the common perception of risk management as a complex process involving probability and statistics. Instead, they argue that it is a natural and crucial activity that can be broken down into six fundamental questions. These questions are applicable across various contexts such as personal decisions, projects, processes, and organizational decisions. The first question, 'What are we trying to do?', leads to the initial step of risk management, which is objective setting. This involves understanding the scope, context, and environment for managing risk. The speaker emphasizes that risk management is not about being overwhelmed by uncertainty but rather about taking control and making informed decisions.
Mindmap
Keywords
π‘Risk Management
π‘Objective Setting
π‘Risk Identification
π‘Risk Assessment
π‘Risk Evaluation
π‘Risk Analysis
π‘Threats and Opportunities
π‘Response Planning
π‘Monitoring and Control
π‘Change Management
π‘Intuitive Process
Highlights
Risk management is a natural and important process, not just about probability and statistics.
It involves asking and answering six basic questions relevant to any situation.
The first question is about setting objectives and understanding the context for risk management.
The second question focuses on identifying potential risks that could affect goals.
Risk assessment involves evaluating the importance of identified risks.
Prioritization of risks is based on their likelihood and potential impact.
The fourth question is about designing responses to identified risks.
Responses to risks can involve avoiding, minimizing, or protecting against negative impacts.
For positive risks, responses might aim to maximize or exploit opportunities.
The fifth question is about implementing the planned risk responses and evaluating their effectiveness.
The sixth and final question is about monitoring for changes that could introduce new risks.
These six questions make risk management intuitive and applicable to any scale of project.
Risk management does not have to be overly bureaucratic or rely heavily on statistics.
For larger projects, more detailed application of these questions with tools and templates may be necessary.
The same six questions apply regardless of the complexity of the project.
Risk management can be simplified by focusing on these six key questions.
Transcripts
people say to me what's risk management
really all about surely it's a lot to do
with probability and statistics and a
complex process that's very difficult to
apply and I disagree I think managing
risk is one of the most natural things
we can do and one of the most important
and for me risk management is
essentially asking and answering six
basic questions and they're questions
that everybody wants to ask no matter
what situation they're in whether it's a
personal dma a project process or some
kind of organizational decision the
first question is what are we trying to
do and that really leads us into the
first step of a risk process which is
objective setting understanding the
scope and the context and the the
environment within which we're having to
manage risk so what am I trying to
achieve is the first question and it's
the first step of the risk process once
we know what we're trying to achieve the
second question is what might have
affect me are there things out there in
the future which could either hinder me
achieving my goals or maybe even help me
and that question what might affect me
is our step into risk identification
finding the uncertainties that matter
the future events which if they occurred
would help or hinder as we try to
achieve our goals the third question is
that not all of those things we've
identified are equally important so my
third question is which of those things
that might affect me are most important
and that leads us to the step of the
risk process that we call risk
assessment risk evaluation or risk
analysis trying to prioritize those
things that might affect us in two key
Dimensions How likely is it to happen
and if it did happen what could it what
effect could it have on our goals either
positive or negative because of course
threats in uh risk includes both threats
and
opportunities so our first three
questions are what am I trying to
achieve what might affect me and which
are the most important ones that gives
me a prioritized list of uncertainties
that matter now the fourth question what
should we do about it and this is really
important because otherwise we're just
the victims of uncertainty and things
might happen on our projects which we
weren't expecting so now we know what
the key risks are we can design some
responses we could try on bad risks to
avoid them or minimize them or protect
ourselves for good risks we could try to
maximize or exploit them or to make
ourselves more able position ourselves
to be better able to exploit them to use
them if they happen so our fourth
question what am I trying to achieve
what might affect me which are the
important ones and what shall I do then
of course we have to do what we said
we'd do and our fifth question is did it
work often we find that the actions that
we plan to take into in response to risk
are not actually achieving what we did
want and so we might need to modify our
approach and the last question which is
really important question six what
changed projects life business is
constantly changing very Dynamic and we
need to make sure that we spot the new
risks that have Arisen since the last
time we looked since the last time that
we took
action now I think those six questions
are easy they're intuitive they're the
sorts of questions that anybody would
ask in any important situation what am I
trying to achieve what might affect me
which are the important ones what can I
do about it once I've done that did it
work and what's changed and if we build
our risk process around those six simple
questions then it becomes easy to do it
becomes intuitive it becomes a natural
process that doesn't involve lots of
bureaucracy lots of forms lots of
Statistics we're just asking and
answering important questions of course
on a bigger project we might want to
apply those six questions at a more
detailed level with templates and tools
and modeling and all sorts of other
approaches but as at its roote whether
we're trying to put a man on the moon or
we're trying to uh move from one side of
the office to the other a complex
project or a simple project the same six
questions apply so next time you're
tempted to think that risk management is
really difficult just remember the six
questions ask them answer them and
manage your risk
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