I have just delivered a short presentation in a University project management course under sponsorship of a local oil and gas company when a student followed me out to ask about risk as a function of time. It is amazing that many talks about risks without delving or even mentioning the time element. To underscore its role is almost like trying desperately to instill a modern concept in the skull of a cave man.
As you can imagine, I was quite happy to oblige. Time is one of the essential risk attributes often missed that I feel anyone who shows interest on the subject, is a friend. Learning starts with interest. He was quite interested how I explained in class the risk concepts surrounding impact and consequence. However, he was doubly interested on how time plays a major part to risk-based management and how to visualize risk against a timeline.
It is worth the time for any risk practitioner to reflect on risk and time. To underline the importance of time should be given huge consideration in making decision. It is a vital component to touch on when explaining action plan to stakeholders.
As the time element increases into the future, the probabilities of achieving the deliverables change. The probability can go up or down depending on the objective, and nature or measure of the projected consequence. Time is an important, mandatory consideration in risk and risk-based management Figure 1).
Figure 1 – Risk as a Function of Time
Police will say, for example, “…the probability of finding a missing child alive decreases as the days pass by” for obvious reasons we are all aware of. If a walk-a-ton has no time limit, the probability of each participant completing the race increases. It is not a hundred percent that all will finish considering a time constraint. One can expect a hundred percent probability of completion if one is to finish the race next month or month after, or within a year. The risk taken against the background of time makes it more revealing. It makes us appreciate risk more!
Another example is home fires. It starts small and spread quickly. There is relatively very little time before it burns one to the ground. In fact, in less than 30 seconds a small flame can get completely out of control and turn into a serious fire. History will show that it only takes minutes for thick black smoke to fill a house and then consumed in flames.
How does one mitigate the consequence of fire? What is the probability of dying if caught up inside the house in 60 seconds from when the fire starts? What is the probability of surviving a conflagration within 15 seconds from when the fire started? As you can clearly imagine, the longer the time you stay inside the house from when the fire started, the lesser the probability of you surviving the ordeal (Figure 2).
Risks revolve around objective or objectives so you have to be careful who provides the inputs during risk assessment. Whose interest you represent provides the framework of understanding. Ensure clarity on what you are asking or what you are after.
In additions to impact, consequence, time, one has to understand that business risk is dual. Dual being, it can be an opportunity or/and a threat. Keep that in the back of your mind.
During risk identification and assessment, considering the priority of driving objectives is critical. This is when one has to take what I call in risk-based management, the “objective point of view.” An objective point of view is standing on the footing of each driving objectives and making the assessment.
I want you to reflect on the logic of the example below. The situation calls for more understanding than meets the eye. Once you digest the message, you will appreciate the fact that risk is relative. I call it risk relativity theory (RRT). If you start thinking about it, a theory is already a misnomer because it can easily pass as a principle.
“For a thief, a good security system is a threat. To the security guard, it is an opportunity to lessen the risk of robbery and to increase the chance of catching the thieves. Depending on individual perspectives and to which side of the fence someone belongs, a risk can be a threat or an opportunity. Each individual player within the risk universe will see things a bit differently compared to another, with some seeing exactly the opposite. In each case, one can see only one attribute. It will either be a Threat OR an Opportunity, depending on his/her involvement to the goal at play. Risk is objective-based or interest-based. For me, business risk is a product of probability and consequence and a function of time (Frago, Risk Concepts, Philosophies, Methods and Approaches, 2013 and Frago, R., 2015, Risk-based Management in the World of Threats and Opportunities).”
Readers will find more detailed discussions about the subject of Risk and Time in the paperback edition of the book “Risk-based Management in the World of Threats and Opportunities: A Project Controls Perspective.”
It is also available in Amazon’s Kindle edition. Follow the hyperlinks below for more information. Grab a copy now!
Rufran C. Frago (050715) – Author