Definition Of Key Concepts

Risk: An uncertain event or set of circumstances that, should it occur, will have an effect on achievement of one or more of the project’s objectives (APM- PRAM Guide 2004; BoK7, 2019)

Risk: Is an uncertain event or condition that, if it occurs, has positive or negative effect on project’s objectives (PMI- PMBoK Guide, 2017)

Risk: Is uncertain that matter. What matters is any thing that can affects project objectives (Hillson, 2017).

Risk: Is the effect of the uncertainty on objectives (International Organization Standardization-ISO- 31000).

Effect is a deviation from the expected (positive or negative)

Objectives can be in aspects of cost, schedule, quality, stakeholder’s satisfaction etc.)

 Definition Of Key Concepts.

Risk: The possibility that events will occur and affect the achievement

of strategy and business objectives (COSO, 2017)

Uncertainty: A lack of complete predictability of an event occurring (or not) and its related impact. The state of not knowing how or if potential events may manifest. (COSO, 2017)

Uncertainty: Is the state of deficiency on information related to understanding or knowledge of an event in terms of its impact, or likelihood. (Hillson, 2017)

 Definition of key concepts.

Event: An occurrence or set of occurrences. They include things like;- • Change in interest rates,

A competitor launching a new product,

The retirement of a key employee,

Changes in the governance and operating structure,

• Any other?

Impact: The result or effect of a risk. There may be a range of possible impacts associated with a risk. The impact of a risk may be positive or negative relative to the project objectives or business objectives.

Likelihood: The possibility that a given event will occur.

 Characteristics Of Risk

Risk is characterized by the following key elements:

• Must be uncertain

• Future event

• Must have objectives

• Must have an effect (positive or negative)

• Must have probability and impact

▪Risk is inevitable in an organization when undertaking projects.

▪The fact is that all projects have some degree of risk because predicting the future with certainty is impossible.

 Some Concepts Under Project Risks

▪Inherent risk: A risk existing in the absence of any action to control or

modify the circumstances

▪Residual risk: A risk that remains after all the efforts (current controls) have been made to mitigate or eliminate a risk (an inherent risk) associated with an objective or a business process.

▪Risk analysis: Systematic process applied to understand the effect of the uncertainty of the risk on our objectives.

▪Risk register/inventory: A tool used in the risk management process to keep an overview of identified risks and corresponding mitigations or counter measures.

Some Concepts Under Project Risks

▪Risk Appetite: The type of risk an organization is prepared to pursue

or take in anticipation of a reward.

▪Risk Appetite: The types and amount of risk, on a broad level, an organization is willing to accept in pursuit of value.

▪Risk appetite can vary based on a number of factors, such as:

 • Company culture

• Competitors

• The significance of the objectives to the organization

• The financial strength and capabilities of the organization

Risk appetite is communicated by management, authorised by the board, and disseminated throughout the organisation.

Some Concepts Under Project Risks

Risk threshold: A measure of the level of risk exposure above which action must be taken to address risks proactively, and below which risks may be accepted.

This determines at which point the risk becomes unacceptable to stakeholders. Something that we can measure with a plus or minus boundary.

Budget. Any cost overrun up to 5% of budget must be authorized in advance by the project sponsor. Any underspending beyond 10% of budget must be notified to the project sponsor to allow possible budget reallocation to other projects.

Schedule. There is no flexibility in the final project delivery date, which is required to meet a fixed client launch date.

 Some concepts under Project risks

Risk description: A structured statement of risk, usually containing three

elements: cause- risk- effect, often combined using risk metalanguage.

Example

Objective: Increased accessibility and connectivity to water and sanitation

Target: Increased water and sanitation access and connectivity from 77.5% to 85% by Dec.2022.

Risk: Vandalism of water infrastructure.

Causes

• Ready Market for vandalized properties such as water pipes
• Poor living standard/unemployment

▪ Effects

• Project completion delay
• Cost overrun

Some concepts under Project risks

Risk metalanguage: A structured description of a risk that separates

cause, risk, and effect.

• A typical risk description using risk metalanguage might be in this form: “Because of/ If <cause>, <risk> might occur, which would lead to <effect>.”

Example Of Risk Metalanguage Statement

• Because of Poor living standard of community members Vandalism of water infrastructure may occur which may lead to project completion delay
• Because of Production outsourcing we may be able to learn new practices from our selected partner leading to increased productivity and profitability
• Because of competition from other organisation loss of key employees may occur leading to impacting staff retention targets

Some Concepts Under Project Risks

Risk threshold: A measure of the level of risk exposure above which action must be taken to address risks proactively, and below which risks may be accepted.

This determines at which point the risk becomes unacceptable to stakeholders. Something that we can measure with a plus or minus boundary.

Budget. Any cost overrun up to 5% of budget must be authorized in advance by the project sponsor. Any underspending beyond 10% of budget must be notified to the project sponsor to allow possible budget reallocation to other projects.

Schedule. There is no flexibility in the final project delivery date, which is required to meet a fixed client launch date.

 Some concepts under Project risks

Risk description: A structured statement of risk, usually containing three

elements: cause- risk- effect, often combined using risk metalanguage.

Example

Objective: Increased accessibility and connectivity to water and sanitation

Target: Increased water and sanitation access and connectivity from 77.5% to 85% by Dec.2022.

Risk: Vandalism of water infrastructure.

Causes

• Ready Market for vandalized properties such as water pipes
• Poor living standard/unemployment

▪ Effects

• Project completion delay
• Cost overrun

Some concepts under Project risks

Risk metalanguage: A structured description of a risk that separates

cause, risk, and effect.

• A typical risk description using risk metalanguage might be in this form: “Because of/ If <cause>, <risk> might occur, which would lead to <effect>.”

Example Of Risk Metalanguage Statement

• Because of Poor living standard of community members Vandalism of water infrastructure may occur which may lead to project completion delay
• Because of Production outsourcing we may be able to learn new practices from our selected partner leading to increased productivity and profitability
• Because of competition from other organisation loss of key employees may occur leading to impacting staff retention targets