As a result of 37 years’ experience working on major capital projects I have become convinced that a significant factor leading to enterprise success is the application of Risk Management methodology. So much so that I have spent the past 9 years coaching Major Oil and Gas companies such as Shell, Premier Oil, Repsol Sinopec, Nexen, Total and Spirit Energy in the use of risk management tools and facilitating risk workshops.
Risk Management processes have now become embedded in almost all UK major energy organisations with most employing their own risk managers. The methodology is applicable to any project, organisation or enterprise.
Nevertheless, many companies have not yet discovered the huge advantages it offers:
- Reduced unexpected costs
- Better informed and more believable business plans
- Increased likelihood of targets being met.
- Reduced consequences when unexpected events occur
- There are also some less tangible benefits:
- Improved communication
- Helps individuals assess risks considering company goals
- Focusses attention on most important issues
- Leads to a common understanding and improved team spirit
- Demonstrates a responsible approach to stakeholders
Not only do Risk Management processes protect against internal and external threats, they encourage exploitation of opportunities. Risk management is not necessarily about avoidance of risk, it is about understanding your risks, making sure time and energy is spent on areas that deliver greatest return and it is about learning from past experiences.
Risk management processes need not be complicated, in fact in many organisations they are best kept simple. It is most important that there is commitment from management and staff and that there is an appetite to introduce actions that will better protect and align with aims of the enterprise. In the long term, introduction of a risk culture means that new risks are intuitively dealt with quickly and efficiently. Furthermore, formal tools such as a risk register provide the ability to demonstrate to stakeholders that a responsible approach is being taken by properly managing risk exposure. The risk register is commonly used to support strategic decisions and influence business plans.
6 Steps to Reduce Risk Exposure and Increase Probability of Success.
Step 1. Define Goals. If not already defined, clear goals are written down and constantly referred to.
Step 2. Identify Risks. Identify what may hinder or prevent goals being achieved (threats) and what could help reach them (opportunities). This is best carried out initially in a workshop environment where ideas and fears can be shared. It is so important that this process is skilfully facilitated. Personal bias is common. Strong personalities can overbear others and people may try to avoid difficult issues. Good facilitation and follow-up one-to-one sessions normally resolve these issues.
Step 3. Prioritise. Evaluate each risk for probability and impact. There may be a cost effect, loss of business or reputation and it may cause delay to an important deadline. Opportunities are evaluated for manageability (how easy is it to implement) and potential benefit.
Step 4. Mitigate and Exploit. Establish strategies designed to protect against biggest threats and exploit best opportunities. Allocate risk owners.
Step 5. Monitor. Agreed actions must be carried out. Aggressively manage the risk register. Hold regular meetings with action owners to ensure actions are taking place. Where difficulty is experienced, offer assistance or reallocate.
Step 6. Review. What worked well? What didn’t work so well? Are you in a better place risk wise? How much has been saved? Using your new found learning and experience it’s time to take a fresh look at goals and begin the process again.
Like all new ideas, implementation of a risk management culture must be done skilfully otherwise it may not become established. Using management of change techniques, Value Performance will train your employees, coach your organisation through the process and provide required tools. It will be done in such a way that, once embedded you will wonder how you managed without Risk Management.
About the Author
Paul Foy is director of Value Performance who provide high value coaching, training and workshop facilitation in the areas of lessons Learned, conflict resolution/arbitration, decision making and planning, specialising in qualitative and quantitative risk management methods. Paul lectures in Risk Management at The University of Aberdeen, is a chartered engineer, holds a MEng, an MSc in Project Management and a degree in Psychology.
For more information and to contact Paul Foy visit www.valueperformance.co.uk or find him on Linked-in.
