Welcome to our Resources Section where you will find a wealth of interesting and thought-provoking information and articles on a wide range of subjects related to management development.
We try not to take ourselves too seriously, but to be honest we find our subject area fascinating and we get very excited about new ideas (and old ones) in people development and business psychology.
In addition, we try to stay ahead of the game and we maintain a culture of continuous learning amongst ourselves, fuelled by our curiosity and thirst for knowledge. We believe this adds greater value for our clients, by helping them stay ahead of the rest.
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Topic of the month: Quick guide to risk management
First, assess the level of risk.
For each risk, assign a risk value in answer to these two questions:
What is the probability this risk will occur?
What would be the impact if this risk should occur?
Each of these elements are then rated from 1-10, (with 1 being low and 10 being high).
Probability
1………2………3………4………5………6………7………8………9………10
Impact
1….......2….......3….......4……….5……….6……..7……….8………9………10
Work out the percentage risk.
Multiply each of the two numbers by 5 and then add the results together to find a percentage risk factor. For example:
Probability 3 x 5 =15
Impact 7 x 5 = 35
= 50% Risk Factor
Then decide what level of risk you can tolerate!
For risks with high ratings for either impact or probability, devise contingency plans by:
o Making revisions to your schedule or adjusting resource assignments
o Generating backup plans.
o specify the circumstances that would trigger the contingency plans into action.
Next, select one of the main risk management strategies:
Reduction: Risk reduction strategies reduce the frequency or severity of the losses resulting from a risk, usually by changing operations in order to reduce the likelihood of a loss, reduce the resulting damages, or both. An example of a risk reduction strategy is the preparation, before a loss occurs, of contingency plans to expedite recovery from the loss.
Control: After a loss has occurred, risk control strategies keep the resulting damages to a minimum. Examples include the effective administration of third party claims and the use of previously established contingency plans to reinstate discontinued services as quickly as possible.
Transfer: Risk transfer strategies turn over the responsibility of performing a risky activity to another party, such as an independent contractor, and assign responsibility for any losses to that contractor. (When used as a risk financing method, such strategies transfer the liability for losses to another party, such as an insurance carrier.)
Contractual risk transfer assigns risk to a specific party to a contract as part of a larger business transaction. This strategy is often used to assign to a contractor or vendor the risks of loss arising from its provision of goods or services. The justification for this transfer, which is usually accomplished through a combination of indemnity and hold-harmless provisions and insurance requirements, is that the contractor or vendor is in a better position than the public entity to reduce the frequency and severity of certain losses. When evaluating the option of transferring risks to the entity’s contractors and vendors, an organisation should carefully consider the types of losses that might occur under its contracts, how to assign the risk for these losses, and what types of insurance will be required to support the assignment of those risks.
Accept: The final strategy for managing a risk is the possibility of risk acceptance. The decision that nothing can or needs to be done at present. It would not be feasible to develop a contingency plan against everything that can go wrong however in accepting a risk this process notes that the situation needs review and consideration as the project progresses.
Reduction: Risk reduction strategies reduce the frequency or severity of the losses resulting from a risk, usually by changing operations in order to reduce the likelihood of a loss, reduce the resulting damages, or both. An example of a risk reduction strategy is the preparation, before a loss occurs, of contingency plans to expedite recovery from the loss.
Control: After a loss has occurred, risk control strategies keep the resulting damages to a minimum. Examples include the effective administration of third party claims and the use of previously established contingency plans to reinstate discontinued services as quickly as possible.
Transfer: Risk transfer strategies turn over the responsibility of performing a risky activity to another party, such as an independent contractor, and assign responsibility for any losses to that contractor. (When used as a risk financing method, such strategies transfer the liability for losses to another party, such as an insurance carrier.)
Contractual risk transfer assigns risk to a specific party to a contract as part of a larger business transaction. This strategy is often used to assign to a contractor or vendor the risks of loss arising from its provision of goods or services. The justification for this transfer, which is usually accomplished through a combination of indemnity and hold-harmless provisions and insurance requirements, is that the contractor or vendor is in a better position than the public entity to reduce the frequency and severity of certain losses. When evaluating the option of transferring risks to the entity’s contractors and vendors, an organisation should carefully consider the types of losses that might occur under its contracts, how to assign the risk for these losses, and what types of insurance will be required to support the assignment of those risks.
Accept: The final strategy for managing a risk is the possibility of risk acceptance. The decision that nothing can or needs to be done at present. It would not be feasible to develop a contingency plan against everything that can go wrong however in accepting a risk this process notes that the situation needs review and consideration as the project progresses.
Revise schedule plans by:
· Negotiating deadlines of high risk tasks
· Scheduling tasks later in the project which could be postponed or cancelled if necessary
· Conservatively estimating duration of tasks on the critical path
· Generating a schedule to take into account the contingency.
Revise resource plans by:
· Reassigning experienced people to high risk and critical path tasks
· Assigning a person as a backup to any tasks where the loss of a team member would be damaging
to the project.
· Preventative actions that will be taken to reduce or remove risks
· Contingent actions that can be implemented should a problem occur
· The circumstances that would trigger each contingency plan into action
Last month's Topic: Decision Making
Psychological forces that block intelligent decision making
Rubin (1986) describes several unconscious barriers to decision-making:
(1) Being out of touch with our (painful) feelings and (stressful) values will block clear thinking. This also leads to accepting the way things are. People become resigned or detached and say "I don't care" but, more accurately, they are paralyzed, i.e. unfeeling, unmotivated, uninvolved, and indecisive.
(2) Self-doubt, anxiety, depression, suppressed anger, and a lack of hope interfere with decisions and may even lead to self-defeating acts.
(3) An exaggerated notion of oneself may also lead to bad decisions, e.g. unwise decisions may be made just because they make us look important or "successful" for the moment.
(4) Being overly dependent (desperate to agree with someone, wanting to be liked, wanting glory for self-sacrifice, or just being afraid to make waves) handicaps the decision-maker.
(5) Wishful thinking in many forms (perfectionism, wanting it all, wanting simple solutions, hoping something better will come along) messes up decision-making.
(6) If we abuse ourselves after making a poor decision, we will avoid making decisions in the future.
(7) If certain outcomes scare us, we may not seriously consider these alternatives although they are good ones.
(8) Sometimes our emotions cause us to rush decisions ("I have to decide right now about getting married") or drag them out ("I'll think about it later"). Both can be disastrous..
(9) If a group is making a decision, it should be aware of "groupthink" (Janis & Mann, 1977). There is evidence that groups can sometimes solve problems better than individuals alone ("two heads are better than one"), but at other times groups are very ineffective or unreasonable ("a camel is a horse made by committee"). Groups make good decisions if the majority of members are competent, work well together and there is a positive atmosphere.
How to overcome these barriers
- When making a decision you are simply choosing from among alternatives. You are not making a choice between right and wrong.
- Avoid snap decisions. Move fast on the reversible ones and slowly on the non-reversible.
- Choosing the right alternative at the wrong time is not any better than the wrong alternative at the right time, so make the decision while you still have time.
- Do your decision making on paper. Make notes and keep your ideas visible so you can consider all the relevant information in making this decision.
- Write down the pros and cons of a line of action. It clarifies your thinking and makes for a better decision.
- Make decisions as you go along. Do not let them accumulate. A backlog of many little decisions could be harder to deal with than one big and complex decision.
- Consider those affected by your decision. Whenever feasible, get them involved to increase their commitment.
- Recognize that you cannot know with 100% certainty that your decision is correct because the actions to implement it are to take place in the future. So make it and don't worry about it.
- Trust yourself to make a decision and then to be able to field the consequences appropriately.
- Don't waste your time making decisions that do not have to be made.
- Determine alternative courses of action before gathering data.
- Before implementing what appears to be the best choice, assess the risk by asking "What can I think of that might go wrong with this alternative?"
- Consider making the decision yourself in lieu of a group, but recognize the potential for less commitment by those affected.
- As part of your decision making process, always consider how the decision is to be implemented.
- Once the decision has been made, don't look back. Be aware of how it is currently affecting you and focus on your next move. Never regret a decision. It was the right thing to do at the time. Now focus on what is right at this time.
- Mentally rehearse implementation of your choice and reflect in your imagination what outcomes will result.
- Discontinue prolonged deliberation about your decision. Make it and carry it through.
- Once you have made the decision and have started what you are going to do, put the "what if's" aside and do it with commitment.
