There are two sides to risk; there are threats and opportunities, negatives and positives.

That is why we often describe what we do as Uncertainty Management; ultimately, it is about helping decision-makers understand the potential consequences of their decisions.

There is no risk without objectives. So the only uncertainties that are relevant are those that affect the objectives.

Taken together, this gives us the following definition:

Risk is the uncertainty around the achievement of identified objectives. It covers both threats against the objectives and opportunities to achieve the objectives.

By understanding and measuring risk the right way, decision-makers can understand what to do in the face of uncertainty. They can make decisions that are solely focused on delivering their objectives.

Careful analysis of that risk gives you constructive answers to key questions:

• What is the overall effect of the identified risks (what risk exposure is presented by a particular project)?
• Which risks need to be dealt with first, and what can be done about them?

All Projects are undertaken under conditions of uncertainty.

Because projects are complex interactions between people, processes and the environment, the outcomes are inherently unknowable, both at macro and micro level.

Risk in projects arises from the interaction between:

OBJECTIVES and UNCERTAINTY

What Must Happen
vs.
What Might Happen

At  UMU.  we have adopted the definition of risk suggested in the APM PRAM Guide, extended to include both the downside (risks) and upside (opportunities):

"An event or set of circumstances that should they occur would have an effect on the achievement of objectives"

Projects consist of a system of assumptions, constraints, expectations, relationships, objectives and success criteria. Uncertainty is generated, magnified or reduced through the complex interactions of this system.

Risk management is intrinsic to good and effective project management. Project teams should use the risk management process as a dynamic and informative support to day-to-day decision-making.

Programmes, collections of projects, have all the same issues as projects.

But they have an added dimension; they interact with other related projects – which often share related objectives, resources and funding.

A programme will have its own set of objectives, assumptions and constraints, one of which will be for its constituent projects to be successful.

The aim of uncertainty management on programmes is very similar to uncertainty management on projects. The main difference lies in understanding the interaction between the different projects in the context of uncertainty, otherwise known as the portfolio effect.

• Similarly to financial investing, a portfolio of unrelated projects will have a lower combined risk exposure than the sum of its individual projects.
• However, a portfolio of related projects may have a higher combined risk exposure, for example, if there is a common resource constraint.

In terms of programmes of capital projects, this means that an organisation undertaking a series of projects can combine its risk exposure in order to reduce the overall contingency needed to provide adequate cover for those projects.

However, it should be noted that in the case of related or similar projects, the overall risk exposure may be increased due to a correlation between the projects.

One of the aims of uncertainty management is to make a proper assessment of the overall risk that the organisation faces from a programme of projects by examining and revealing the dependencies between projects.

There is a timeline associated with the management of risk:

By analysing and monitoring risk, you are managing proactively - preparing before the event - rather than reactively - improvising after the event.

Through targeted and appropriate management of risk and opportunity, we aim to keep projects in the proactive zone.

Allan Robinson: Principal Consultant, Uncertainty Management

Allan heads up the Project and Programme Risk team within  UMU.  He has a doctorate based in complex systems analysis and is published in both risk and Value Management. He is solutions focussed and trained in Cognitive Edge© facilitation and Risk Management. Allan has supported clients in the development and implementation of processes and capabilities to enhance the understanding of uncertainty.