Close Quarter Risk Management Methodology Close Quarter Limited

Close. Quarter Risk Management Methodology © Close Quarter Limited 2005 www. closequarter. co. uk

Why bother with Risk management? Introduction & objectives § Project plans are often developed in the expectation that everything will go to that plan, however projects rarely go straightforwardly to plan, for example: - Resources may not be available as needed - Stakeholders may resist or oppose the project - Other, higher priority tasks may arise - Requirements may change - The business case may need to be changed - Deliveries of part or all of the solution may be late § Risk management aims to: - Identify and assess key risks, and put in place agreed actions – and specific owners of these to mitigate or eliminate the risks - Track the risks regularly and ensure they are properly managed - Ensure the sponsor and all other key stakeholders have complete visibility of the risks, so enabling them to make any necessary judgements on intervention. Thereby ensuring ‘no surprises’ - Be simple and easy to apply – otherwise it just wont get done No worthwhile project is risk free If a project is worth doing, then its risks are worth managing © 2005 Close. Quarter Ltd. (www. closequarter. co. uk Tel: 020 7748 2225) “Risk management method” (v 1. 1) 5 April 2005 - Page 2

Risk management: helping your sponsor and boss sleep better at night Introduction & objectives § It’s easy when you are fully involved in the delivery of a major programme to overlook the needs of your sponsor, key stakeholders (and your manager) to feel confident that the project (or programme) is under control § Ideally you should be able to communicate your level of control in a simple transparent manner, which does not consume too much time and effort from the individuals charged with oversight of the safe delivery of the programme § Bureaucracy and over reporting can kill projects. You want to avoid the Dilbert’s boss syndrome where reporting and project administration becomes more important than the project itself § The risk management method described below sets out to provide a simple and powerful method of control We want to help you ensure that your project sponsor can be confident that your project is under control and you are focusing on what really matters © 2005 Close. Quarter Ltd. (www. closequarter. co. uk Tel: 020 7748 2225) “Risk management method” (v 1. 1) 5 April 2005 - Page 3

The main objective of the risk management method is to ensure that all key risks identified are actively managed Overview 2 1 Identify additional “unstated assumptions”, which are critical for the success of the project. Are you dependent on another function or external party for your success? Identify key issues and risks 3 Consult “subject matter experts” to determine whethere are further risks from their experience that you should consider additionally Risk Management Process Summary 6 Track Risks 4 5 Rate Risk i. Group risks into similar categories ii. Create a new category if a particular risk doesn’t fit with your existing categories iii. Rate the risk associated with each category iv. Then determine the overall level of risk for your workstream © 2005 Close. Quarter Ltd. (www. closequarter. co. uk Tel: 020 7748 2225) Create suitable action plans Create actions to eliminate or mitigate each risk. It may not be possible to eliminate the risk in the short term, in these circumstances determine what actions might reduce the likelihood of the risk, mitigate or delay its impact or develop a contingency plan Who? What? When? “Risk management method” (v 1. 1) 5 April 2005 - Page 4

Example – developing a risk management plan: Arranging a wedding and reception on a Caribbean island Risk Assessment Step 1: Initial Key Risk Assessment Illustrative ? Availability of flights to Caribbean Island ? Marriage license not considered valid outside of the Caribbean ? Wedding rings lost in transit ? Caterers not available during visit ? In-laws unable to fly from USA for medical reasons ? Costs/budget unknown ? Parents and family not able to come due to existing commitments © 2005 Close. Quarter Ltd. (www. closequarter. co. uk Tel: 020 7748 2225) “Risk management method” (v 1. 1) 5 April 2005 - Page 5

To avoid hitting the project “icebergs” all risks should be made visible, particular the “unstated assumptions” we take for granted Risk Assessment Step 2: Unstated Assumptions Illustrative Partner prefers wedding ceremony in Caribbean rather than a traditional wedding in home town Hotel has sufficient capacity and availability for preferred weekend Friends and family are happy to travel to Caribbean for ceremony My partner wants to get married rather than stay single! It is helpful to get a third party to interview you to uncover the unstated assumptions underpinning the success of the project/ workstream that you are managing © 2005 Close. Quarter Ltd. (www. closequarter. co. uk Tel: 020 7748 2225) “Risk management method” (v 1. 1) 5 April 2005 - Page 6

“You don’t know what you don’t know!” So ideally consult an expert who has experience in tackling your particular subject area! Risk Assessment Step 3: Subject Matter Expertise ? ? Illustrative Guests need to have had inoculations to travel safely to the Caribbean Take out insurance cover to protect against the tour operator going bust Have you arranged a suitable venue for the stag party? – can you get the guests to the wedding in time after this event? Have you arranged a suitable venue for the hen party? © 2005 Close. Quarter Ltd. (www. closequarter. co. uk Tel: 020 7748 2225) “Risk management method” (v 1. 1) 5 April 2005 - Page 7

We can then assemble all of the risks to understand our complete risk exposure at this point Risk Assessment Illustrative "ID (#)" Category Risk/Issue 1 Logistics 2 Legal 3 Ceremony Wedding rings lost in transit 4 Reception Caterers not available during visit 5 Logistics In-laws unable to fly from USA for medical reasons 6 Financial Costs/budget unknown 7 Logistics Parents and family not able to come due to existing commitments 8 Ceremony Partner prefers wedding ceremony in Caribbean rather than a traditional wedding in home town 9 Logistics Hotel has sufficient capacity and availability for preferred weekend 10 Logistics Friends and family are happy to travel to Caribbean for ceremony 11 Emotional My partner wants to get married rather than stay single! 12 Logistics Guests need to have had inoculations to travel safely to the Caribbean 13 Financial Take out insurance cover to protect against the tour operator going bust 14 Emotional Have you arranged a suitable venue for the stag party? – can you get the guests to the wedding in time after this event? 15 Emotional Have you arranged a suitable venue for the hen party? Availability of flights to Caribbean Island Marriage license not considered valid outside of the Caribbean © 2005 Close. Quarter Ltd. (www. closequarter. co. uk Tel: 020 7748 2225) “Risk management method” (v 1. 1) 5 April 2005 - Page 8

We then group the risks into their logical categories to help us understand the overall risk exposure at this point Risk Assessment Illustrative "ID (#)" Category Risk/Issue 3 Ceremony Wedding rings lost in transit 8 Ceremony Partner prefers wedding ceremony in Caribbean rather than a traditional wedding in home town 11 Emotional My partner wants to get married rather than stay single! 14 Emotional Have you arranged a suitable venue for the stag party? – can you get the guests to the wedding in time after this event? 15 Emotional Have you arranged a suitable venue for the hen party? 6 Financial Costs/budget unknown 13 Financial Take out insurance cover to protect against the tour operator going bust 2 Legal 1 Logistics Availability of flights to Caribbean Island 5 Logistics In-laws unable to fly from USA for medical reasons 7 Logistics Parents and family not able to come due to existing commitments 9 Logistics Hotel has sufficient capacity and availability for preferred weekend 10 Logistics Friends and family are happy to travel to Caribbean for ceremony 12 Logistics Guests need to have had inoculations to travel safely to the Caribbean 4 Reception Caterers not available during visit Marriage license not considered valid outside of the Caribbean © 2005 Close. Quarter Ltd. (www. closequarter. co. uk Tel: 020 7748 2225) “Risk management method” (v 1. 1) 5 April 2005 - Page 9

The next step is to determine actions which will either eliminate or mitigate each risk – in each case be specific on Who, What, When? Action Planning Illustrative Step 4: Create suitable action plans The initial priority is to identify actions for those areas of greatest perceived risk Risk Log - Closed Risk Log - Open ID(#) (Started or Complete) 1 Date Who required completed Category Risk/Issue Action(s) Logistics Availability of flights to the Caribbean Island In-laws unable to fly from USA for medical reasons Parents and family not able to come due to existing commitments Hotel has sufficient capacity and availability for preferred weekend Friends and family are happy to travel to Caribbean for ceremony Guests need to have had innoculations to travel safely to the Caribbean Check flight availability with travel agency See if possible to travel to Gulf of Mexico and take a cruise Contact family to determine existing commitments for 2003 Ring hotel and check availability in August 2003 Check best man and bridesmaids are available for date in August 2003 Include in wedding invitation checklist 5 Logistics 7 Logistics 9 Logistics 10 Logistics 12 Logistics 1 -Oct-02 30 -Sep Status James Completed 8 -Oct-02 Ann 01 -Oct-02 James Started Ann Completed 08 -Oct-02 01 -Oct-02 James 01 -Nov-02 Ann At the end of the week/month it is useful to transfer (cut and paste) closed risks into the Closed Risks worksheet for future reference © 2005 Close. Quarter Ltd. (www. closequarter. co. uk Tel: 020 7748 2225) “Risk management method” (v 1. 1) 5 April 2005 - Page 10

It is suggested that risks are then summarised on a weekly/monthly basis and assigned a risk assessment for each category and an overall assessment for the whole workstream using a four point scale Risk assessment Illustrative Step 5: Rate Risk RAG Status Risk Assessment GREEN (Minimal/ low risk) All under control with no significant risks to manage. There may be some minor risks/issues but these have clear action plans in place. If there are no significant risks to manage, then set the risk assessment at GREEN! A 1 Medium risk. Some risks apparent but with clear action steps in place with high confidence of their successful implementation. A 2 High risk. Major risks have been identified, however action plans that eliminate these risks are not yet fully developed. RED CRITICAL. Potential show stopper risks, some action plans in place but even when these are implemented, significant risk exposure will remain. A 4 point scale is preferred to avoid middle score bulging – i. e. everything is set to AMBER! © 2005 Close. Quarter Ltd. (www. closequarter. co. uk Tel: 020 7748 2225) “Risk management method” (v 1. 1) 5 April 2005 - Page 11

The Risk Summary Report can be used as a tool to inform key stakeholders and management on a regular basis of the project risk status Risk assessment Step 5: Rate Risk Overall Workstream Risk Assessment Risk Summary Overall Risk Assessment Workstream Overall Comment A 2 Wedding Event The most significant issue is to confirm that we do want to spend the rest of our lives together and we are meeting tonight to confirm "ID (#)" A 2 GREEN A 2 RED Category Risk/Issue Overall Comment regarding the Overall Risk Assessment Action(s) Date Required Logistics Availability of flights to Caribbean Island Check flight availability with travel agency Logistics In-laws unable to fly from USA for medical reasons See if possible to travel to Gulf of Mexico and take a cruise 8 -Oct-03 Logistics Parents and family not able to come due to existing commitments Contact family to determine existing commitments for 2004 01 -Oct-03 Logistics Hotel has sufficient capacity and availability for preferred weekend Ring hotel and check availability in August 2003 08 -Oct-03 Logistics Friends and family are happy to travel to Caribbean for ceremony Include advice on innoculations required with wedding invitations 01 -Nov-03 Logistics Guests need to have had inoculations to travel safely to the Caribbean Send out invitations and determine likely number of guests and who is able to attend the ceremony 01`-Nov-03 Ceremony Partner prefers wedding ceremony in Caribbean rather than a traditional wedding in home town Conversation with partner to agree that the Caribbean is the perfect location for our wedding 01 -Oct-03 Ceremony Wedding rings lost in transit Take out insurance to cover possible loss in transit 20 -Nov-03 Financial Costs/budget unknown Prepare budget based on number of guests, likely venue etc. 08 -Oct-03 Financial Take out insurance cover to protect against the tour operator going bust Identify list of insurers – contact one with appropriate cover and purchase 20 -Oct-03 Contact Marriage Licensing in UK to determine steps for getting legally married in the Caribbean 08 -Oct-03 Reception Caterers not available during visit Research on internet to determine suitable caterers in location and availability 08 -Oct-03 Emotional My partner wants to get married rather than stay single! Have a serious chat with partner and establish whether they really do want to spend the rest of their life with me 01 -Oct-03 Emotional Have you arranged a suitable venue for the stag party? – can you get the guests to the wedding in time after this event? Contact travel agent to determine a list of suitable venues in the Caribbean 01 -Nov-03 Emotional Have you arranged a suitable venue for the hen party? Contact travel agent to determine a list of suitable venues in the Caribbean 01 -Nov-02 Legal Marriage license not considered valid outside of the Caribbean Individual Risk Assessment for each Category © 2005 Close. Quarter Ltd. (www. closequarter. co. uk Tel: 020 7748 2225) 1 -Oct-03 “Risk management method” (v 1. 1) 5 April 2005 - Page 12

A simple traffic light scheme suffices to identify high-rated risks for close attention. Some suggested guidance on how you might assess risks Risk assessment Impact if risk occurs Likelihoo d of risk occurring A Inconvenient but deadline, scope and resources probably unaffected B Disruption to deadline, scope or resources C Major disruption, deadline and/or scope compromised but project will probably still complete D Major disruption - deadline and/or resources, and/or scope, severely compromised; high risk of project failure A Low risk of happening (0 -10%) B Medium probability (11 -30%) C Medium-high probability (31 -70%) D Very high probability (>70%) Rating of risk overall Warning: A traffic light is just an indicator – it is not a substitute for thinking or judgement © 2005 Close. Quarter Ltd. (www. closequarter. co. uk Tel: 020 7748 2225) “Risk management method” (v 1. 1) 5 April 2005 - Page 13

The Project Manager can then report the Overall Risk for the Project by assessing the risk in each workstream Risk assessment Date: dd month year Overall Risk Assessment Comment Workstream © 2005 Close. Quarter Ltd. (www. closequarter. co. uk Tel: 020 7748 2225) Overall Comment “Risk management method” (v 1. 1) 5 April 2005 - Page 14

Getting a powerful risk assessment in place can be done quickly Getting started § If you do not have a risk plan in place already, you can generate a first draft in a workshop event taking 1 to 2 hours for most projects. For large complex programmes, you may wish to start with a high-level overview assessment which can then be followed up by more in depth follow-up events and interviews for particular areas § We would suggest you run a workshop with key stakeholders and those key individuals involved in delivering significant parts of the project § Suggested workshop approach - Brainstorm a list of potential risks, putting each onto a ‘Post-it’ note on the wall - When the flow dries up, prompt with probing questions until all are agreed the list is sufficiently complete or the allotted time runs out – any risks identified later can (must) always be added to the list - Group the risks by their affinity to each other – aim for 4 -10 groups - When this has been completed, name the groups (see next slide for typical categories for a change project involving technology) A risk workshop can ensure the key individuals involved in the project have a powerful shared understanding of the potential risks to be managed © 2005 Close. Quarter Ltd. (www. closequarter. co. uk Tel: 020 7748 2225) “Risk management method” (v 1. 1) 5 April 2005 - Page 15

Typical risk categories for a change project involving technology Getting started § Every project or programme is different, however there are frequently common categories that can be found across projects § For example some Typical risk categories for a change project involving technology include: - Value Realisation – Projects exist to deliver value to the organisation. One needs to ensure delivery of the value and benefits originally promised to justify the project in the first place are on track - Stakeholder Management - Lack of buy in, failure to clear obstacles or actual opposition threatens project success. Stakeholders can be individuals, departments, functions or indeed external partners - Resource, Management & Planning - Problems with approach, scope, time, resource (human and otherwise) or decision making that impact project delivery - Technical - Problems with technical aspects of the solution or with the conduct of the project © 2005 Close. Quarter Ltd. (www. closequarter. co. uk Tel: 020 7748 2225) “Risk management method” (v 1. 1) 5 April 2005 - Page 16