Business Finance- Risk Management

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timer Asked: Jun 9th, 2015

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Looking for a brief summary on the following transcript. About 125 or so words


Risk Management.doc

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Skillsoft 1537 M/F: Male/Female Speaker M: Even saying the words “risk management” make you feel serious and probably slightly scared. It sounds like serious complicated stuff, the sort of stuff that you spend weeks learning about. Risk management is very, very simple and I’ll try and walk you through how to get it to work. Have you ever been to a meeting and the guy up front is announcing the new goals, the new challenges, the deliverables? Talking about this opportunity. And you’re watching this presentation and you can see the flaw, the big flaw, the reason it’s all going to crash. Do you always stick your hand up and go, “Hey! It’s going to fail! I can see why!” Not always. Why? Because you’re sensible. Because if you complain early you’ll be seen as negative. So normally what you do is you nudge your friend who you’re sitting next to and you whisper to them, and they laugh, because you’re laughing about what’s going to go wrong. And you can see it. But you don’t tell anyone else and then you leave the meeting. And you leave the meeting. One month passes, two months pass exactly as you predicted it, it goes wrong. You meet your friend in the corridor, you say, “Hey, do you remember we said it go wrong, it’s gone wrong!” And you laugh together and you’re happy because you predicted it would go wrong and it’s gone wrong. This is madness. Something’s gone wrong. How come the person up front didn’t see that risk? Well, first of all, they probably didn’t ask you. Most of the time, people don’t ask Skillsoft 1537 Page 2 anyone else about their risks. They try and do the analysis themselves. So that’s the first mistake they make. The second mistake they make is they talk about risk. If you say the words “risk” to somebody, everyone knows the answers. “It’ll overrun! It’ll cost too much!” If you use a word like fear or concerns, they’ll go, “Oh, well my fear is that we won’t get on very well.” No one is going to write that down as a risk. So first you have to ask for those particular risks by using the word “fears.” Then on top of that, if they actually do collect them, they have this wonderful way of managing them. What they do is they have a grid—I’m sure you’ve seen this. Has magic letters. HML, it says on one side. HML. I think the HML stands for high, medium and low. And then they rank these risks they’ve found as high probability, medium probability, low probability. High impact—I don’t know if any of you have ever done one, but have you noticed how all the ticks end up in the box “medium, medium”? Nothing ever ends up in the box “high, high.” Because everyone’s too smart. If you put anything in the high probability, high impact box, your boss is going to give you a hard time. You’re going to be read, you’re going to have to report on it. So what happens is we write them all down, we put them on the shelf. And nothing happens, the risks aren’t managed. Let me explain to you how you manage risks. I don’t need to teach you anything because you already know the answer to this one. The answer to managing risk is to treat risks exactly as you would respond if you were watching a science fiction film. Have you seen science fiction films? You know how they Transcript prepared by Rogers Word Service 919-834-0000 1-800-582-8749 www.rogersword.com Skillsoft 1537 Page 3 all involved aliens who are dangerous? “We’re going to eat you,” I mean, basically that’s all they seem to do for a living. Think about it. Start of an alien science fiction film. There’s a space crash somewhere. Somebody goes up towards this crash. You’re shouting at the screen, “Don’t go there!” Why do you say “don’t go there”? Because it’s dangerous. You know it’s a risk. How come the person up front in that presentation didn’t know it was a risk? So the first thing you have to do is identify the risks. They never do that in alien films. They always go into the alien spacecraft. There’s lots of steam and lights. They go up to the first chair with an alien in it and they turn the chair around. The alien in the first chair is always dead. The alien in the second chair is also always dead. And then the music starts. The alien in the third chair starts to move and raises its tentacles. And you’re going, “Run! Run! Hit it and run!” In other words, kill it now, get rid of it now before it extends its tentacles and kills you. They never do that in risk management. They write a high-medium-low thing and instead of killing the aliens, they stick it on the shelf. No, of course not. So the first step is identify the aliens, the risk. Second one is kill it immediately. What else? What do they always do in the films? They don’t kill it, they take it back. Back to the only safe place on the moon, the laboratory. But they never put them in decent containment. They always put it on the kitchen table. And they always get somebody to keep an eye on it. Who do they select? Do they select the smart cadet or is it the chap who is a little bit weird or the mad scientist who wants to open the door and go and study it? It’s always the wrong person. So having failed to contain it, the monitoring is Transcript prepared by Rogers Word Service 919-834-0000 1-800-582-8749 www.rogersword.com Skillsoft 1537 Page 4 rubbish. They’re not checking if this thing is coming alive, it always escapes, grabs the scientist by the throat, kills him, escape and opens the sliding doors. Then it eats everyone and the only way you can get rid of is by blowing up the whole space station, which is what is known as Plan B. There are only five stages to making risk management work. Identify that risk, kill it immediately. Don’t just leave it lying around. Contain it. Make sure if it goes wrong it’s not going to wreck everything else. Monitor it. Be clear on what you’re going to notice first. And finally, have up your sleeve a Plan B. [END OF RECORDING] Transcript prepared by Rogers Word Service 919-834-0000 1-800-582-8749 www.rogersword.com
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