Table of Contents
1.0 Contemporary quality or risk:
Qualitative Risk Assessment:
Quantitative Risk Assessment:
Generic Risk Assessment:
Site Specific Risk Assessment:
Dynamic Risk Assessment:
2.0 Impact on managerial decision:
3.0 Application of Risk management:
4.0 Impact of risk assessment on project life cycle:
5.0 Review one best practice model Risk and quality management:
Risk is known as possibility or probability of something happening that has a negative impact on surrounding and humans’ value to avoid this because of its consequences for health, wealth, property and environment. Risk is the deviation from the expected outcome that could be either positive or negative. The definition of risk and methods to analyze and measure the risk varies in different practice areas such as health, business, IT, environment, security and construction. There are different categories and factors that should consider during the assessment of risk vary from business to business and also with geographical location (Hillson, 1997). Risk assessment generally took place in few steps such as:
Identification of hazards
Selection of the that might be harmed
Evaluation of risk and expected precautions to avoid this
Record the possible risks and cross validation
Improve the assessment if needed after the cross validation
Here are few different types of risk assessment and where to use them:
This is one of the major forms of risk assessment in which is based on the expertise and personal judgments of the person carrying out the risk assessment. The person uses his experience and also consults with the other experienced workers doing that. Risks are divided in three major categories which are medium high and low level risks. The qualitative risk assessment doesn’t depend on the numbers but also could be assessed by severity and the consequences of risk for example in case of a safety risk assessment it could be the severity of the harm along with the similarity of harm.
As it is clear from the name that this type of risk assessment depends on the quantity of risk which could be calculated numerically by assigning mathematical values to different factors and then calculating the overall impact. This type of risk assessment is often used in manufacturing industry such as aircraft, rocket designing, weapons designing and in the construction department. While doing the quantitative analysis the values are assigned to the risks which depend on the severity and consequences of the risks but still the value is assigned by the person doing the quantitative assessment and the value assigned to every factor is based on the person’s judgments so this could be a semi qualitative analysis in such cases.
This type of risk assessment includes the usual types of risks and it reduces the effort and duplication in the risk assessment. We can say that it is a template for this process to assess the general risks and common hazards. It can be used for the similar type of assessments for different sites and apparatus. Sometimes generic risk assessment highlights a hazard that was not considered in other type of assessments.
This type of risk assessment contains the information related to a specific site and only considers the risk factors for that specific project. Site specific risk is assessed generally in construction project. For example in case of a construction project site specific risk assessment is most important that considers the actual site conditions geographical location, weather and land conditions.
DRA is the assessment of risk that is incidentally and could be assessed by observing and analyzing the surrounding while working on a project. Dynamic risk could be assessed while entering the site by observing any hazard, slippery surface or the structure conditions and can be avoided by reporting the risk to the site manager and also keeping in mind the possible exit strategy in case of danger.
Every business and enterprise face the risks and uncertainties in their business that can reduce the value of their organization and cause them a financial loss. This risk depends on various factors including the foreign exchange, interest, competitor, natural disaster and market fluctuations. To reduce the effect of these risks to minimize the loss and increase the value of the company is very important. It is one of the major concerns of the managers in the organizations to assess the risk and its overall impact and all the managers in most of the businesses pay attention to every minor risk as compare to the small business where the process of risk assessment is not systematic and depends only on the observation, intuition and understanding of the investor or the owner of the business. In organizations risk is often calculated by the previous data analysis and decision making depends on the assessment of the risk. The targets and investments are considered and then the effect of the risks is calculated and finally the value added to the organization. There are many project managements tools that are being used to track the progress of a project but there is no specific tool for the assessment of risk for a project either it is a financial risk or prioritization.
Risk assessment and management plays a vital role in the success and failure of the projects and decision making. Risk management helps to make decision in case of risk uncertainty. To investigate and calculate the performance of a decision making under uncertainty could be calculated with the help of pay off matrix that basically depends on four major factors which are maximax, maximin hurwicz alpha index and minimax regret (Rekhi, 2007). The first criteria which is maximax is known as the criteria of optimism and it focus on the factors or the risks that would be positive or kind so this is would support the extremely optimist decision making while the second factor is called as the factor of pessimism and it is based on the risks which are negative or it belief that the nature is unkind. The third criterion compromises between the first two assessment factors. While the last criteria are based on the regret of the decision maker after making a decision and by know he knows that what will happen and wishes for his decision to be right. Thus, risk assessment and management play very important role in decision making, risk management and completing a project. (Hulett, 2001)
There are four stages of a project lifecycle that play a major role in a project from start to end. These stages are following:
Evaluation of the project
All these stages play important and equal role in a successful project. So the risks regarding any stage may cause a serious loss and decrease the project success rate so it is very important for the project team to analyze all these stages and assess all the major and minor risks than may cause any hazard at any stage because all these stages or linked with each other so any ignorance at previous stage may cause a potential loss at the next stage. First stage is the start of a project called initiation which is also known as the initial stage in which the outcomes and the goals of the project are decided. This stage defines the vision of the project and what and organization wants to implement. Any risk emerging at this stage may affect the project on rest of the stages so the initiation stage should be completed very accurately in order to avoid any potential threat at next stages. For example, in a construction project this stage is to define what a contractor wants to build, its size its requirements and all the things he wants to add in a building. (Getto, 1999)
The second stage is the planning of a project and this stage plays the role of the foundation in a project. At this stage the planning team defines the set of plans that how to carry out this project and its different phases of completion. This phase defines the set of rules deadlines and outcomes of the project which helps to manage the cost of the project, its quality and avoid the risks and issues in the later stages. At this stage it is defined that how many floors, rooms and apartments will be there in a project, there structures size cost and time to implement.
The third stage in the project life cycle is implementation of the project. At this stage the project is implemented on the bases of the plans and the goals of the project. This stage often not be completed on the bases of the original plan because it is believed that the researcher have to focus at this stage very closely to the project and made changes in case of risks and threat occurs. (Getto, 1999)
The fourth stage of a project lifecycle is the evaluation of the implemented project. At this stage researchers evaluate the overall effectiveness of the project that helps the organization to further carryout the project and its implementation and maintenance. This phase also defines the value added to the company through this project. (Getto, 1999)
One of the best Risk and Quality Management model, is the Maturity Model which is based on ISO 31000. The main aim of this model, is the provision of an assessing tool to companies and agencies for using in order to develop their current level of risk management maturity. Based on the results of model, an improvement plan can be developed that will provide guidance to organizations for reaching the target maturity level. This model will be used as reference to improve the risk management process as it set clear path related to how risk management can be established. (Wadell, Feb 2002)
This model is based on four standard levels including Ad Hoc, Initial, Repeatable, and Managed. At the AdHoc level, the organizations are not aware of need for managing the risk and has no structured approach for dealt with uncertainty which resulted in series of operations and project crises. No attempt is made for identifying the risks to the project or for developing the contingency plans. The normal way of dealing with issues is to react after the occurrence of a problem with no proactive thought. In-spite of these, Level 1 organization frequently make products that work, although they will usually exceed their actual budget limits. (Wadell, Feb 2002)
At level 2, that is Initial Level, companies experiment with risk management application through nominated individuals within a project and the organizations has no structures or formal Risk Management process. Although they are aware at certain level of risk management benefits.
At level 3 of Repeatable, companies implement risk management in their daily business operations and implementing management of risk in most if not in all phases of projects. At level 3, projects make realistic commitments as per the results from previous projects & on risk identified in running projects. The process of risk management may be different among projects at level 3 organizations. (Wadell, Feb 2002)
At level 4 Managed, organizations develop a risk aware culture that need proactive approach for managing the risks in all organizational prospects. Risk information is actively used for improving all process of the business for increasing success probability in projects and operations.
Getto, G., 1999. Risk management in complex project organizations. s.l., Proceedings of 30th annual project management institute .
Hillson, D. D., 1997. Towards a risk maturity model. International journal of Project & business Risk Management , Volume 1, pp. 35 - 45.
Hulett, D. D., 2001. Key Characterization of Mature Project Risk Management Organinzation. s.l., s.n.
Rekhi, S., 2007. Managerial Decision-Making Under Risk and Uncertainty.
Wadell, S., Feb 2002. Risk Management maturity Model.
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