SEI Risk Management Paradigm (Copyright Carnegie Melon University)
Classifying Risks - Classifying or categorizing like or related risks helps build a clearer picture of the project’s risks. Eliminating duplicates and merging similar risks can possibly increase the return on investment for mitigation, i.e. eliminate or reduce more than one risk at a time through the same mitigation plan.
Evaluate the basic risk attributes of probability and impact in order to provide a basis for relative comparison to other risks. This assists in planning a risk response strategy by determining which risks are the most important. A risk’s criticality is based on the interaction of how likely it is to happen and the magnitude of the consequence (negative or positive) to the project.
Prioritise the risks relative to one another in order to decide how to allocate resources for mitigation particularly if the project team has identified a large number of risks.
Assign Responsibility - A key to risk management is team member ownership of and accountability for risks. The project manager should ensure that responsibility for every risk is assigned internally to a team member even if a risk is to be transferred outside of the direct control of the project team. The risk owner is to act as the project manager or sub-contract manager on behalf of the project team in order to ensure that nothing falls through the cracks.
Determine the strategy that will be followed in response to the risk. In order to decide on a response strategy consider the following questions:
- Can we live with this risk?
- Can we do anything to mitigate or avoid the risk within a reasonable budget and timeframe?
- If yes, what would be the measurable goals so we can tell we are done mitigating the risk?
- Would it be just as effective to deal with the risk if and when it becomes a problem?
What is left?
Residual Risk – after countermeasure is installed, there is still some risk, which is the residual risk
(Threats x vulnerability x asset value) x control gap = residual risk
Total risk – when a company chooses not to implement any type of safeguard. Reasoning for this would be because of the cost/benefit analysis results.
Threats x vulnerability x asset value = total risk
It Is a Method, Not the Solution
Risk Management is just a means to an end… Good Corporate Governance!
Bibliography (For the various prior risk posts)
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