Risk as a Function of Time – Part 2

By this time, you should have read the first part of  “Risk as a Funtion of Time.”

Let us get back to the “time component” of risk and answer a simple question made by a Transport Manager operating the Red Arrow fleet traveling from Calgary to Edmonton.

He asked, “What is the probability of snowing?”

This question casually asked, seems to be perfectly fine. A closer look however, makes it fundamentally flawed and incomplete. This is a risk question that is not properly answerable because it is without the time dimension of risk. The answer will come out without much thought and that makes the feedback less useful to a good risk manager. A risk professional knows that the answer based on personal assumptions introduces bias. It can be anything and wide ranging and nobody intelligent enough has the capacity to normalize it.

How about if we change the question to, “What is the probability of snowing within the next 2 hours from now? What is the probability of snowing within the next twelve months (Figure 1)?

050415-Probability of Snowing

Figure 1

Apparently, the question becomes clearer. The answer became more obvious, easier, and impeccable. The response makes more sense and is easier to formulate. It facilitates the identification of other risks and their corresponding response plans. If probability of snowing is zero, then there’s no risk. If probability is 50% and consequence is zero, then also there’s no risk. When both impact and probability is assessed to be zero, the risk is zero. Since risk points to the future, when the duration from now (future timeline) considered is zero, then there is no risk (Figure 2).

050415-Risk as a Function of Time

Figure 2

Risk is about the future. Remember that from now and the future there is a timeline. The timeline duration to the future has to have a value. Threat and Opportunity is about the future (Figure 1).

Unless time travel becomes a reality, then this conceptual principle will remain. If that happens, then perhaps, I will call it FRISKs for future risks, and PRISKs from past risks. Excuse me for deviating almost absurdly but it is fun thinking about possibilities.

Another item to remember is this: when risk (threat and/or opportunity) does happen, it is no longer risk. If the risk is a threat, we should call it an issue or a persistent problem (Frago, R. 2015.Risk-based Management in the World of Threats and Opportunities). If the risk is an opportunity, we can call it reward, benefit, advantage, solution or windfall. Although what I explained above is a lot of information to some, taking time to understand the risk concept presents a better point of view. Understanding the time component of risks will make you a better project risk manager.

Source: Frago, R., 2015.Risk-based Management in the World of Threats and Opportunities: A Project Controls Perspective

Rufran C. Frago (050715) – Author

You will find a more detailed discussion about Risk 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.

The book provides new/additional knowledge to project management practitioners (beginners to experts), risk management specialists, project controls people, estimators, cost managers, planners and schedulers, and for students of undergraduate courses in Risk Management. The sectional contents offer practical and common sense approach to identifying/managing risks. It is a must have for company managers, directors, supervisors, aspiring industry professionals, and even those students fresh from high school. The material is especially design to start with the foundational principles of risk gradually bringing the reader to deeper topics using a conversational style with simple terminologies.

So, if you are interested, check it out!

Source: Frago, R., 2015.Risk-based Management in the World of Threats and Opportunities: A Project Controls Perspective

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About rcfrago

Rufran C. Frago is a practicing Professional Engineer (APEGA), a PMP (PMI), a CCP (AACE) and a RMP (PMI). He has published more than 100 articles. He is the author of the book Risk-based Management in the World of Threats and Opportunities: A Project Controls Perspective He studied at Batangas State University and University of Batangas graduating with a Diploma in Petroleum Refinery Maintenance Technician (1979), Bachelor of Science in Mechanical Engineering (1984), and Bachelor of Science in Management Engineering in 1987 respectively. He was in his senior year taking up Bachelor of Science in Electrical Engineering, needing only one semester to complete, when he took a break to concentrate on married life. Rufran has never stopped academic learning after getting his degrees in the University. He continues his education by taking up some MBA courses under the University of the Philippines-PBMIT Consortium (1987-1988). He completed Computer Technician Program at International Correspondence School, Pennsylvania, USA in 1994, Applied Project Management Certificate program at Southern Alberta Institute of Technology in 2009, and Professional Management Certificate program specializing in Construction Management in 2014. He is now completing the Professional Management Certificate program specializing in Risk Management. He was a recipient of the Gerry Roxas Leadership Award (1976) and the American Field Service (AFS) Scholarship in 1976-77, studying in America for a year. Upon his return in 1977, California-Texas Philippines (Caltex Philippines Inc.), one of Asia’s biggest oil and gas refineries at the time, awards him with a two-year national college scholarship, specializing in Petroleum Refinery Maintenance. He went on extensive training in various maintenance disciplines for the next two years. Caltex hired him upon his graduation in 1979. He has spent more than 38 years of his life working in the Oil & Gas, Petrochemicals, Oleo-chemicals, Sugar Refining/Manufacturing, Consultancy, High School and University Education industries in Asia, Middle East, Canada, and North Africa). Rufran has worked with Caltex, Uniman, Unichem (now Cocochem), ARAMCO-KSA, Central Azucarera de Tarlac, Arabian Gulf Oil Company-Libya, Batangas State University, St. Bridget’s College, JG Summit Petrochemicals, Halliburton-Kellogg, Brown and Root, and OPTI Canada. He works with Suncor Energy Inc at present. He has wide range of expertise that includes problem solving, project management, training and mentoring, programs and projects planning and scheduling, cost management, risk-based management, construction management, project review and auditing, estimating, engineering and design, fabrication and module management, maintenance, operation, material selection, warehousing, EH&S and reliability engineering (predictive and preventive maintenance). He wants to share his knowledge and leave behind some form of legacy to all specially his wife, children and grandchildren, Eva and Mia.
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