Analytical techniques for risk management

home_training_323x215  I’ve recently posted a question (on a LinkedIn Group) regarding the usage of analytical techniques in Risk management.

The responses I got where very enlightening, so therefore I encourage you to have a look at them!

Analytical techniques for risk management | LinkedIn.

For you that do not have a linkedIn Account, I’ve pasted the conversation below.

 

Hi Peter!

I have a question for you…

The major tool/technique (according to PMI), when it comes to “Plan Risk Management” is the use of “Analytical Techniques”. I personally find this particular term very “vague” & “chaotic”.

In my opinion, it describes everything and nothing, at the same time!

What do you think? Is this term being used in polychore and PRINCE2? If yes, do you have any particular examples to provide.

Have a wonderful and prosperous New Year!!

Ilias

Comments

  • Peter Krischel

    Peter

    Peter Krischel

    Hi Ilias. You won’t find much about this in PRINCE2. Just like in PMI, PRINCE2 describes countermeasures. Both don’t really explain how to do risk management.

    Polychor Knowledge Management looks at risk in a different way. Risks are gathered as data in Polychor Project Management and in Project Management the data is analyzed and Risk Reports are created. The information and data are analyzed in Knowledge Management to create knowledge and wisdom.

    Polychor Risk Management uses Lean Six Sigma to measure risks and uses NLP techniques to influence risks. I am still working on the Knowledge Management book but linking Lean Six Sigma, the ITIL Life Cycle and NLP techniques into one model is quite unique. Polychor calls this Value Management. I will post the diagram in this group later.

    Does this help you?

  • Peter Krischel

    Peter

    Peter Krischel

    Ilias please just look at chapter 7 in my book to see what Value Management is all about.

  • Simon Robertson PMP SCT AEC

    Simon

    Simon Robertson PMP SCT AEC

    Hi Ilias,
    If you are a PMI member than you are able to download a copy of their Practice Standard for Risk Management and it provides “less vague” comments but as a RM practitioner the steps are fairly straight forward. Identify risk, start a risk register to capture them, prioritise them according to P X I and treatment options, decide which ones are to be managed, plan responses (mitigation action), and put those mitigation actions in your project plan as tasks with resources and costs. Deal with them that way and you will find it works! I have found a risk workshop as the best way to start with all the team together. Hope that helps but please do connect with me if you want more.

  • Steve Boronski

    Steve

    Steve Boronski

    I think PRINCE2 has some good simple measurement techniques such as Probability, Impact and Proximity combined with very simple evaluation techniques. When these are combined with PRINCE2 risk tolerance and risk budget you have a simple to understand and very powerful practical solution to risk management that the PMI knowledge will complement.

    Hope that helps.

  • Simon Robertson PMP SCT AEC

    Simon

    Simon Robertson PMP SCT AEC

    I agree Steve that the combination of these approaches provides greater insight – often calling the same thing by a different name!! In the end the method used is linked to the appetite or tolerance the project team and the organisation has for proper risk management. It is no light activity!

  • Peter Krischel

    Peter

    Peter Krischel

    Nice to see a real discussion going on 🙂 In PRINCE2 probability, impact and proximity are mentioned but how do you actually calculate them and how can you learn from risk management? What I am trying to do is tackle that question using Six Sigma. So using the Define, Measure, Analyze, Improve, Control cycle. If we can measure how long it takes to take action on or solve a risk we can measure the variation and by decreasing variation increase the Sigma. You don’t do this just for one project. You need to compare projects and you need a lot of data. Such an analysis is beyond PRINCE2 or PMP. Sorry but I am not that familiar with MoR and PMI’s RM approach.

  • Steve Boronski

    Steve

    Steve Boronski

    I will try to keep the conversation going for you Peter.

    I would like to see more of how you use DMAIC. I have only really used it for changing operational BAU stuff. This would include risk no doubt.

  • Peter Krischel

    Peter

    Peter Krischel

    I know. That is how most use DMAIC. You know me. I like to link things and like to take them outside their box. This is what Polychor is all about. One process model on all levels in the organisation and linking everything to knowledge management. Axelos P3O and unique in its own sensebut is no match to Polychor. My aim is to build something that is better than the Axelos suit of products. That is quite a challenge and I think I will need a lot of discussions with professionals like you. So keep up the good work. In the meantime read my book 🙂

  • Simon Robertson PMP SCT AEC

    Simon

    Simon Robertson PMP SCT AEC

    You both have some excellent points here. My experience as a Business Risk Consultant with Fujitsu many years ago brought me in contact with this on a daily basis.The calculation of Mitigation action costs is fairly straightforward of course but always involves some assumptions first. It is essentially the action required to close down the causes of the risk. If you can do that you will effectively close down the risk likelihood considerably (Impact may not be hitting so much as well but probabil;ity is key here) AS you know you put this directly into your project plan as an action to be taken under whatever part of the Work Package applies and resource it up in the normal way. So Mitigation is covered by the project budget. So what we did was to agree ahead of time “definitions”.They will not come out here. The Impact Definition Table, and also the PXI Table.are a couple of examples. Basically you change the content according to your project definition but maintain the same overall structure. I’m happy to send you an Excel spreadsheet which we used and I use to this date. The other of course is Risk Reserve or Contingency which either involves using a formula we derived at Fujitsu which works well but conservatively, or we use something like @Risk by Palisade which we used all the time. Does that make sense?

  • ILIAS KATSAGOUNOS

    ILIAS KATSAGOUNOS

    @Peter: I am reading your book at the moment….. and I am looking forward for your next post regarding the mentioned diagram.

  • ILIAS KATSAGOUNOS

    ILIAS KATSAGOUNOS

    @Simon: Thank you so much for your valuable contribution- clarifications. Please do allow me to give some extra info regarding my initial question.
    I have read both the PMBOK and the corresponding practice standard for risk, and we both have to admit that they are a bit “contradictive”.

    To give you an example:
    In PMBoK page 315, paragraph 11.1.2, we can find the Plan Risk Management Tolls & Techniques, which include: Analytical Techniques, Expert Judgement and Meetings.

    When it comes to “Analytical Techniques”, it provides the following explanations:
    “Analytical techniques are used to understand and define the overall risk management context of the project. Risk management context is a combination of stakeholder risk attitudes and the strategic risk exposure of a given project based on the overall project context. For example, a stakeholder risk profile analysis may be performed to grade and qualify the project stakeholder risk appetite and tolerance. Other techniques, such as the use of strategic risk scoring sheets, are used to provide a high-level assessment of the risk exposure of the project based on the overall project context. Depending on these assessments, the project team can allocate appropriate resources and focus on the risk management activities.”

    On the other hand, when we jump to the practice standard, we find two totally different tools: planning sessions and templates.

    A dear friend posed a question to PMI concerning which of the two books is valid for the RMP/PMI certification, and the response that he got was “the PMBoK”. The “practice standard” will be updated in the future…

    Therefore, by combining all the aforementioned, I reached to the following conclusion:

    The steps mentioned in your first post (identify, prioritize, plan responses etc.), are part of the overall risk methodology (which according to PMI, includes the steps/processes: Plan risk management, ID Risks, Analyze risks, plan risk responses & ctrl risks) whereas “Analytical techniques” is just a single tool which is used during the Plan Risk Management Process in order to understand and define the overall risk context of the project.

    Given the PMBoK provides only two examples regarding the use of the aforementioned tool (SH risk profile analysis and strategic risk scoring sheets), I was wondering whether you have any other examples regarding the use of this particular tool.

  • Steve Boronski

    Steve

    Steve Boronski

    I think PRINCE2 might explain this. Assuming I have understood your question.

    The “context” mentioned would be a one-off activity in a project to understand what is actually “at risk”

    The resultant risks identified would then be appropriate to the management of the project rather than extreme events.

    So the tools are used for different purposes.

  • Simon Robertson PMP SCT AEC

    Simon

    Simon Robertson PMP SCT AEC

    Principal Project Manager and Trainer

    @Ilias: LOL! So you have found some contradictions? Well I guess it has to do with the latest person wanting to own the latest term he has given to the old term in use and so on. Yes the Risk Practice standard is older that PMBOK Guide 5th for sure so will have some contradictions. My approach is to take some guidance from each author where it helps and then see what practically works based on the fundamentals which do not change.

  • ILIAS KATSAGOUNOS

    ILIAS KATSAGOUNOS

    @Simon: Marvelous comment (…it has to do with the latest person wanting to own the latest term…)!!
    Straight to the point!! 🙂

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