Understanding Risk

Definition of Risk

• Risk is described as an effect of uncertainty on objectives.
• Focus is not on defining risk but understanding its implications in context.

Key Concepts

• Objectives: Essential for identifying risks. Without objectives, identifying risks is not useful.
• Sequence of Events: Risks, causes, and effects must be carefully distinguished.

Example: Charlie's Objective

• Objective: Arrive at work on time.
  • Potential Risk: Heavy rain.
    • Heavy rain decreases road visibility.
    • Decreased visibility can lead to an accident.
    • Accident results in being late for work.
• **Event Tree Analysis:
  1. Objective: Being late for work (not a risk, but an effect).
  2. Risk: Involvement in an accident (the cause of being late).
  3. Indirect Cause: Heavy rain (an indirect cause of the risk).

Identifying Risks vs. Objectives

• Common misidentifications during risk assessments:
  • Being late, going over budget, project delays, reputation damage, and employee injuries are objectives/goals, not risks.
• Actual Risks:
  • Example: Traffic congestion can be identified as a risk when discussing being late.

Takeaways for Risk Assessment

1. Filter Risks: Remove objectives from the list of risks and focus on their causes.
2. Direct Effects: Ensure that the identified risk has a direct negative effect on the objective.
3. Event Analysis: Identify follow-up events that lead to affecting the objective.
4. Proper Risk Description: Sometimes requires drilling down to analyze inputs effectively.
5. Value of Participation: More involvement in risk assessments improves skills in identifying risks, causes, and effects.

Conclusion

• Encourage participation in risk assessments to enhance understanding and effectiveness.
• Utilize collaborative tools like RiskID to make the process engaging.