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Demystifying quantitative risk analysis

Many people view quantitative risk analysis with a mixture of fear and awe. It’s clearly a very powerful technique in the risk professional’s toolkit, but it seems to be hard to use. As we decide whether it’s appropriate for us to include quantitative risk analysis in our risk approach, we should consider the strengths and weaknesses of this technique, so that we can make a balanced judgement. Using quantitative risk analysis has...

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How to choose the right risk tool

The risk process produces large amounts of data that are needed to support analysis, reporting, decision-making and action. Tools can help us to manage these data efficiently. But there are many alternative risk tools, so how can you choose the right one for your needs? The following factors should be considered: User base. Ask potential users of the risk tool what they need. Consider each user group, as their needs will be...

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Checking the risk process

In some businesses and projects, risk management is described as an exercise in ‘ticking boxes’. This phrase means that people just follow the steps in the risk process, but with no real commitment or energy, and no belief that it will actually make any difference. The term ‘box-ticking’ is always used in this negative way, as a bad thing to be avoided. But perhaps ticking boxes could be useful if we do it differently. The key...

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How risky is your project?

Have you ever been asked “How risky is your project?” Most project managers find it hard to answer this question. Your Risk Register lists all the risks you’ve identified, and these are prioritised for attention and action, with responses and owners allocated to each risk. But how can a list of risks answer the ‘how risky’ question? We need a different concept to describe the overall risk exposure of a project, which is...

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7 steps to analysing risk via Monte Carlo

Monte Carlo simulation is the most common way to analyse risk using numbers. But many people view quantitative risk analysis as too difficult, perhaps because it involves mathematics, statistics and computers. As a result, they miss out on the insights available from this powerful technique. The following seven steps make it easy to do Monte Carlo analysis properly: 1. Define your purpose Why do you need to do this analysis? What is...

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Most project stakeholders don’t understand risk

Ignoring the still relatively large group of project stakeholders who want to pretend there is ‘no risk’ involved in the projects they are overseeing, very few stakeholders really appreciate the difference between a risk threshold, the aggregate effect of the total risk exposure created by the project, and the organisation’s ability to tolerate the risk exposure and the interesting effect of diversification within a...

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Risk management or risk leadership?

Risk management is an important contributor to project and business success. The past few decades have seen growing consensus on the elements required to manage risk effectively, including an efficient and scaleable risk process that can be tailored to the particular risky situation, an appropriate level of infrastructure to support the risk process, and skilled and competent people who know what to do and how to do it. However risk...