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Unit 3University of Sunderland CSEM04 ROSCO
Unit 3:Unit 3: Risk and Opportunity Risk and Opportunity Life CyclesLife Cycles
CSEM04: Risk and Opportunities of Systems Change in Organisations
Prof. Helen M Edwards
Unit 3University of Sunderland CSEM04 ROSCO
OverviewOverview• Risk and Opportunity Life Cycles.• Technical Definitions• Risk, opportunity, or problem• Risk Definition• Is Risk Negative?• Assessment of Risk and the Impact of Time.• Risk Perception and Attitude• Importance of perspective• Risk averse v. risk taker• Risk generic lifecycle• Risk and Opportunity generic lifecycle• Dealing with Risk (Risk Management)
Unit 3University of Sunderland CSEM04 ROSCO
Risk and Opportunity Risk and Opportunity Life Cycles.Life Cycles.
• Traditionally look at risk management – essentially inward
looking– controlling/preventing
risks
• Here also want to look at opportunity management – outward looking– seeking new
opportunities.
System Change
Risk management
Opportunity management
Unit 3University of Sunderland CSEM04 ROSCO
Technical DefinitionsTechnical Definitions
• Risk is the possibility of loss, the loss itself or any characteristic, object or action that is associated with that possibility. – A loss is defined as an outcome that falls short of what
was expected.• “Expectations” are held/defined by stakeholders.
– (Risk in the RISKIT method , Kontio 1997).
Unit 3University of Sunderland CSEM04 ROSCO
Risk, opportunity, or Risk, opportunity, or problemproblem
• Risk and opportunity are inextricably linked with time (particularly the future).– Focus: determining the likelihood, cost/benefit of
the outcomes of “what-if scenarios”. – Focus: uncertainty and decision analysis,
• based on existing data of past experiences, expectations and (often) prejudices.
– As soon as an outcome is reached in a risk or opportunity scenario the risk/opportunity ceases to be an issue.
• But the outcome is either positive or negative.
Unit 3University of Sunderland CSEM04 ROSCO
Risk DefinitionRisk Definition
• In any particular context each risk needs to be defined. – The components that need to be assessed in
order to estimate the overall risk need to be clearly identified and understood,
– The measures that can be taken for the components need to be identified so that the risk can be monitored and evaluated
– Therefore appropriate data needs to be collected at the appropriate time.
Unit 3University of Sunderland CSEM04 ROSCO
Is Risk Negative?Is Risk Negative?
• We tend to think of risk as negative -– essentially we’re looking at a decision point
and emphasising the negative results. – It’s a matter of perspective:– Thinking of changing a system?
• What can go wrong? - are these risks?• What can we gain? Are these risks?
– Thinking of staying with a system?• How can we best use it? - are these risks?• What opportunities might we lose? Are these risks?
Unit 3University of Sunderland CSEM04 ROSCO
Assessment of Risk Assessment of Risk and the Impact of Time.and the Impact of Time.
• Risk = Probability x Impact.
• But…both the probability and the impact of an event happening can change over time.
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risk probability impact
Unit 3University of Sunderland CSEM04 ROSCO
Assessment of Risk Assessment of Risk and the Impact of Time.and the Impact of Time.
• Risk assessment relies on the availability of relevant data and information. – Some risks can be
readily assessed, others can’t,
– but the risk assessment must always be “timely”.
Unit 3University of Sunderland CSEM04 ROSCO
Risk Perception Risk Perception and Attitudeand Attitude
• In assessing (and even identifying risks) people’s preconceptions and prejudices come into play.– In different groups the reaction to a risk-laden
scenario can vary, with entrepreneurs keen to exploit opportunities and others looking to minimise their exposure to risk.
– The reaction may vary depending upon:• the amount at stake, • the context of the risk and • the time horizon.
Unit 3University of Sunderland CSEM04 ROSCO
Importance of Importance of perspectiveperspective
• Issue: “New Technology to be used in system change”
• Risk perspective = no experience of this – how do we ensure this doesn’t cause problems?
• may lead to consideration of training staff in advance, bringing in experts etc.
• Opportunity perspective = we can become leaders in our field– should give potential for growth and market
dominance • how do we exploit/ensure this?
Unit 3University of Sunderland CSEM04 ROSCO
Risk averse Risk averse v. risk takerv. risk taker
• Organisations and people tend to be on a spectrum of risk averse to risk taker
• risk averse: – Inward, focus on control on risks and resolution
of problems
• risk taker (entrepreneur)– Outward, focus on looking for opportunities,
expect the payoff to be worth the risk taken.
Unit 3University of Sunderland CSEM04 ROSCO
Risk generic lifecycleRisk generic lifecycle
allocating&monitoring budget levels
continual risk monitoring
mitigation and contingency planning
modelling riskrelationships
risk prioritisation
risk impact and probability evaluation
goal definition
risk identification
Unit 3University of Sunderland CSEM04 ROSCO
Risk and Opportunity Risk and Opportunity generic lifecyclegeneric lifecycle
allocating&monitoring budget levels
continual risk monitoring
mitigation and contingency planning
modelling riskrelationships
risk prioritisation
risk impact and probability evaluation
goal definition
risk identification
Replace “risk” by
“risk and opportunity”
throughout
Unit 3University of Sunderland CSEM04 ROSCO
DDealing with Risk ealing with Risk (Risk Management)(Risk Management)
• The options available include– Proactive risk management.– Interactive risk management.– Reactive risk management.– Inactive risk management.
• Most risk management approaches are developed to help those who have an interactive risk management approach.
Dec
reas
ing
cont
rol