4. Risk Appetite
Ladies and gentlemen, this is the captain speaking.
Firstly, I’d like to thank you for choosing to fly FlyMe Airlines.
As we taxi out of the runway please make yourself comfortable…
And for those of you sitting on the right side of the plane…
Please look to your LEFT!
5. Ladies and gentlemen, this is the captain speaking. Firstly, I’d like to thank you
for choosing to fly FlyMe Airlines. As we taxi out of the runway please make
yourself comfortable…and for those of you sitting on the right side of the plane…
please look to your LEFT!
10. Section 2: Black Swans
“...there are also unknown unknowns – the ones we don't know
we don't know. And if one looks throughout the history of
our country and other free countries, it is [in this] category
that tend to be the difficult ones.” (Donald Rumsfeld,2002)
11. What is a Black Swan Event?What is a Black Swan Event?
1. it occurs outside projected expectations (a
fat tail to a distribution curve)
2. it carries extreme impact; and
3. it seems explainable after the fact
12. Examples of Black Swan EventsExamples of Black Swan Events
1. Fukushima power plant disaster, Japan
(2011)
2. Volcanic Ash Cloud - Eyjafjallajokul (2010)
3. Urban unrest (2011)
14. Quantitative methods to simulateQuantitative methods to simulate
Black Swan EventsBlack Swan Events
1. Modelling risk interactions – e.g. extreme
changes to correlation assumptions
2. Stress and scenario testing – e.g. series of
earthquakes and tsunamis occur and a
nuclear plant collapse in Japan
3. Horizon scanning – Methodical way of
identifying threats and opportunities
16. Project Life Cycle
Sustainable Business Case using National and Local Strategies
Post Mortem after Closedown
Project
Opportunity
Project
Conceptualisation
Project
Appraisal
Risks
Alternative
scenarios and
options and
related risks and
opportunities
Project
Planning
Project
Construction
and
Monitoring
Project
Closedown
Risk Assessment
17. Impact
Probability
Low Medium High Very High
Low
Medium
High
Very High
Top 10 Risks – Design Project
1. x ( a brief statement of risk – one liners
are sufficient – remember it is a risk so
negative in tone)
2. x ( a brief statement of risk)
3. x ( a brief statement of risk)
4. x ( a brief statement of risk)
5. etc
6. etc
7. xx
8. xx
9. xx
10. xx
3
6
24
87 1
9
10
18. Risk Assessment – key steps
Communicate & Consult
Monitor & Review
Establish
Context
Internal context
External context
Stakeholders’
criteria
Define structure
Identify
Risks
What can
happen?
How and why?
When and
where?
Analyse
Risks
Review controls
Determine
likelihood &
consequence
Hence:
risk level
Evaluate
Risks
Compare against
criteria
Rank risks &
set priorities
Treatment?
Tolerate or
Terminate or
Transfer or
Treat
(4Ts)
Risk Assessment
19. • This strategy indicates that the project has decided not to change the
project plan or is unable to identify any other suitable strategy to adopt.
• Risk acceptance may also occur when the cost of dealing with it would
not be cost effective.
• This could also mean reject the risk if considered that it will not be a
threat to the project.
Tolerate
Risk Response Planning, Monitoring and Control
20. Terminate
• Risk termination means changing the project plan to eliminate the risk or
to protect the project objectives from its impact. Although not all risks
can be totally eliminated some may be avoided by taking this pre-
emptive action.
• In extreme cases, this could mean abandoning the project.
Risk Response Planning, Monitoring and Control
21. • Risk transfer means moving risk to a third party together with ownership
of the response.
• Transferring the risk does not eliminate it; it simple gives another party
responsibility for its management (e.g. Outsource).
• Or this could mean taking adequate insurance cover and pass the risk
to an insurance company.
Transfer
Risk Response Planning, Monitoring and Control
22. • A treating a risk can lead to two actions
• Make contingency arrangements. Risk mitigation may take the form
of implementing new processes, undertaking more preliminary work
or for example, selecting more stable suppliers.
• Contain the risk. This strategy seeks to reduce the risk probability or
its impact by taking early action to reduce the occurrence of the risk
to an acceptable limit.
Treat
Risk Response Planning, Monitoring and Control
23. Risk Response Planning, Monitoring and Control
Tolerate
Terminate
Treat
Transfer
Examples for your design
project?
25. Task 1: Create a risk appetite
statement for each design project.
This should include qualitative and
quantitative measures
26. Task 2: Identify your top risks (max
10) by completing the following
matrix for each design project
27. Task 3: For each risk, identify
mitigating actions by describing
whether you propose to tolerate,
terminate, transfer and treat the
risk. Describe your actions and
rationale
How many people have never been on an aeroplane? How many people have flown on an aeroplane in the last year? Taking you to a situation where a pilot looks to manage risk and thinking quickly he came up with the following announcement….. (see slide build) Can I now have a show of hands for those who would think twice about flying on that aircraft at that time? As can be seen from this example, appetite is quite dynamic as well and needing to be viewed in terms of the context in which it is found.
