Unit 3: Risk and Opportunity Life Cycles

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Unit 3 Risk and Opportunity Life Cycles

• CSEM04 Risk and Opportunities of Systems Change
  in Organisations
• Prof. Helen M Edwards

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Overview

• 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)

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Risk and Opportunity 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.

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Technical 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).

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Risk, opportunity, or problem

• 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.

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Risk 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.

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Is Risk Negative?

• We tend to think of risk as negative -
• essentially were looking at a decision point and
  emphasising the negative results.
• Its 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?

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Assessment of Risk and the Impact of Time.

• Risk Probability x Impact.
• Butboth the probability and the impact of an
  event happening can change over time.

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Assessment of Risk and the Impact of Time.

• Risk assessment relies on the availability of
  relevant data and information.
• Some risks can be readily assessed, others cant,
  
• but the risk assessment must always be timely.

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Risk Perception and Attitude

• In assessing (and even identifying risks)
  peoples 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.

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Importance of perspective

• Issue New Technology to be used in system
  change
• Risk perspective no experience of this
• how do we ensure this doesnt 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?

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Risk averse v. 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.

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Risk generic lifecycle
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Risk and Opportunity generic lifecycle
Replace risk by risk and opportunity
throughout
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Dealing with Risk (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.