Understanding Risk

Definition of Risk

• Risk can be defined as: An effect of uncertainty on objectives.
• The focus of this lecture is not on the definition but rather on understanding the concepts surrounding risk.

Key Concepts

• Sequence of Risk, Causes, and Effects:
  • Confusion can arise regarding when something is identified as a risk versus a cause or an effect.
  • It is crucial to establish clear objectives to identify relevant risks.

Example: Charlie's Objective

• Objective: Arriving at work on time.
• Potential Risks:
  • Heavy rain is initially mentioned as a risk.
  • Analysis of Events:
    • Heavy rain → causes decreased visibility → leads to an accident → results in being late for work.
  • Identifying the Risk:
    • The objective (being late) is an effect, not the risk itself.
    • The real risk is being involved in an accident due to decreased visibility caused by heavy rain.

Importance of Understanding Causes and Effects

• Direct and Indirect Relationships:
  • Direct Effect: Accident → being late for work.
  • Indirect Cause: Heavy rain → decreased visibility.
• It’s important to differentiate between risks, causes, and objectives during discussions.

Common Confusions in Risk Sessions

• Risks vs. Objectives:
  • Commonly confused risks include project delays, budget overruns, reputation damage, and employee injuries.
  • These are objectives to avoid, not risks themselves.
  • Identifying Actual Risks:
    • For example, traffic congestion is a risk that can lead to being late.

Takeaways for Risk Assessment

• Filter Out Objectives: Identify and focus on the actual risks by finding the underlying causes.
• Direct Negative Effects: Ensure that the risk has a direct negative effect on the objective.
• Event Sequences: Analyze follow-up events that affect the objective to clarify the risk.
• Valuable Contributions: Every input during discussions is valuable; further analysis may be necessary to refine risk descriptions.

Conclusion

• Frequent participation helps improve skills in identifying risks, causes, and effects.
• Encourage collaborative tools like RiskID to make risk management engaging.