Philosophy of Risk-based Management

101416-Risk Relativity1

The journey of learning risk and how to manage it is most rewarding to the curious thinker. Curiosity generates interest. Interest produces efforts that result in good education.

The 2009 PMI Global Practice Standard for Project Risk Management, Chapter 2, Section 2.2 (page 9) defines risk as an uncertain future event or condition that could have a positive or negative effect on objectives if it occurs. In a project environment, the definition goes like this: project risk is an uncertain future event or condition that, if it occurs, could have a positive or negative effect on project objectives. The same line of thinking will be true when one talks about a specific risk category such as financial risk, safety risk, business risk, operation risk, or others.

As you have probably readily appreciated in the preceding paragraph, “risk is always in the future.” It is therefore redundant to say “future risk”, a term I often hear from project people when they talk about the subject.

Two key components of risk are probability, and impact. They describe probability of achieving objectives and effect on objectives respectively.

Possible future events must be evaluated and analysis done using the two measures. The probability dimension describes the uncertainty or certainty of a schedule or budget. Impact on the other hand describes the consequence of the risk just in case it does happen (PMI, Project Risk Management, 2013).

Risk is not equal to just any of its own singular attribute. The very existence of risk depends on the function of uncertainty, consequence, and time. How can risk be mistaken to be just a part of its wholeness?

The set theory makes us aware about the concept of uncertainty as a big system where risk resides. The reason why I asked the question emanates from the measure of uncertainty. Given a risk that revolves around a given objective, uncertainty as a system is impossible to measure.

The present accepted measure of uncertainty is probability. We can calculate the probability of an identified and specific risk because we can appreciate the uncertainty boundary (or field) where it lies. Understanding and awareness become a blur when one attempts to go outside this boundary. I refer to it as the uncertainty boundary of understanding.

The finite boundary or a piece of the whole uncertainty system is the only useful element in appreciating risk. It is a piece of the uncertainty concept that has practical use.

The idea of risk and its attributes appears simple enough, yet it can be bigger and more complex than it appears. Human comprehension is infinitely varied, limited only by an individual’s imagination, and this will shape their understanding of the concept of risk. It is not surprising that, out of the many recent great exchanges, we still have relatively no significant additions to the governing laws of risk that can usher a new era of higher event predictability, including their great implications to risk-based management. This is despite the advent of big data.

Have you ever stopped doing what you were doing, sat down, and asked yourself, “What is the purpose of life? What is it that people do every day? What is it that matters most to a person regardless of demographic?”

There are various perspectives; however, it all comes down to one central element, and that is to manage risk. Yes, the purpose of life is managing risk. Even in our sleep, and in our dreams, we administer risks. In our beliefs, in our religion, in our pursuit to be a good person, we manage risks. People have to manage daily the risk of sin, e.g. of temptation, of jealousy, gluttony, revenge, and greed. One needs to control his vice, his expenses, his career, and many others.

Why I did not think of that concept many years before today is a mystery. It is in front me, in all of us, and in the very fabric of our daily life. Risk management is the only thing we do for a living. This intriguing concept drives the reason we go to work every day.

We all have one main, central purpose in life yet we all go about it almost unconsciously.

Source:

Frago, R. (2015).Risk-based Management in the World of Threats and Opportunities: A Project Controls Perspective.ISBN 978-0-9947608-0-7.Canada

Rufran C. Frago-Author

Related sites:

  1. Your World, Our Risk Universe: WordPress
  2. LinkedIn Professional Website

Other books authored by Rufran Frago

  1. Plan to Schedule, Schedule to Plan.ISBN 978-0-9947608-2-1.Canada
  2. How to Create a Good Quality P50 Risk-based Baseline Schedule.ISBN 978-0-9947608-1-4.Canada

P50 and Plan to Schedule

About rcfrago

Rufran C. Frago, P. Eng., PMP, CCP, PMI-RMP, is the Founder/CEO of PM solution Pro, a tradename/trademark of Risk-based Management and Services Inc., a Canadian company focusing on project/business risk-based management consulting, business development, creative products, and training services. Senior project consultant, planner, scheduler, engineer, business developer, published author, with deep, diversified experience in management and controls. Hands-on work experience in engineering, maintenance, reliability program, operation, EH&S, training, and administration. Recognized subject matter expert by peers in project and Turn-around maintenance planning and scheduling, schedule quality assessment, and risk analysis. Proficient in project management framework, processes, tools, systems, and applications. Risk-based practitioner who value safety, integrity, ethics, and professionalism. Mr. Frago's personal work philosophy: "My client's success is also my own!" He has many years of international industry-related work ‎experience in Oil & Gas, Petrochemicals, Oleo-chemicals, Sugar Refining, Power/Utilities/Nuclear, Manufacturing, Consulting, and Education. He has worked in various parts of the world (Location: 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, Saint Bridget's College, JG Summit Petrochemicals, Halliburton-Kellogg, Brown and Root, OPTI Canada, and Suncor Energy Inc. His expertise includes risk-based project management, risk analysis, planning & scheduling, cost management, auditing, maintenance, operation, EH&S and reliability engineering. He is interested in providing solutions and innovations to all clients and stakeholders. Mr. Frago is a risk management professional. He studied at BSU graduating with a Diploma in Petroleum Refinery Maintenance Technician, and BS Mechanical Engineering. He also has a Bachelors degree in Management Engineering from UB. He took up MBA courses under UP-PBMIT Consortium. Rufran completed Computer Technician Program at ICS-Pennsylvania, USA, APM Certificate program at SAIT-Calgary, and PM Certificate program-Construction Management. He is presently taking up PM Certificate program-Risk Management at University of Calgary. He was a recipient of the Gerry Roxas Leadership Award, the American Field Service (AFS) Scholarship grant, and the CALTEX scholarship grant where he specialized in Petroleum Refinery Maintenance. The author wants to share his knowledge and leave behind some legacy to all readers, most especially to his wife, children and lovely grandchildren, Eva and Mia.
This entry was posted in Book, Decision Making, Issues and Problems, Managing Assumptions, Managing Constraints, Opportunities, Planning and Scheduling, Program Management, Project Management, risk, Risk Assessment and Treatment, Risk Case Study, Risk Relativity, Risk Universe, Risk-based Management, rufran frago, Rufran's Blogs, Threats, Uncategorized and tagged , , , , , , , . Bookmark the permalink.

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