Dr. Mike Clayton asks an important question "What is your appetite for risk?" His approach is different than we find in our domain. The inverse question needs to be asked
What is your appetite for delay, cost overrun or possible project failure?
Asking and answering this question is a measure of the organization maturity in the realm of risk management. Our risk management guidance starts with the DoD Model. At first glaince this appears to be overkill. It is not. The principles of risk management are independent of a domain. That's why they're called principles.
The implementation of these principles can be adjusted for the domain but if you skip one or more of the principles, you creating risk again.
In a report sponsored by INCOSE Risk Management Working Group; Project Management Institute Risk Management Specific Interest Group; UK Association for Project Management Risk Specific Interest Group, there are four (4) maturity levels for Risk Management (from Risk Management Maturity Model, April, 2002)
- Level 1 - Ad Hoc - Worship the Hero
- Level 2 - Initial - Try it out an see what happens
- Level 3 - Repeatable - Plan the Work, Work the Plan
- Level 4 - Managed - Measure the Work, Work The Measures
There are many definitions of Risk Management, one comes from PMBOK which defines Project Risk Management as
“the systematic process of identifying, analyzing, and responding to project risk.”
Successful projects have dealt effectively with all types of risk , maximizing benefits while minimizing uncertainty. Which brings up another quote from the "Universal Risk Management Final Report,"
If you can't afford to mitigate the risk now, be absolutely sure you can afford to resolve the problem later when it happens.
Instead of answering Mike's question "What's your appetite for risk?" ask "what's your appetite for paying the price for not dealing with risk now?"
From a Dr. David Hilson newsletter titled "Universal Laws of Risk Management,"
- Risk is uncertain
- Risk Matters
- Managing Risk is a Process
- Risk is Managed by People
