Risk management
Risk management

Start this free course now. Just create an account and sign in. Enrol and complete the course for a free statement of participation or digital badge if available.

Free course

Risk management

7 Summary of Session 8

The next video covers good practice in risk management.

Download this video clip.Video player: Video 6 Good practice in risk management
Skip transcript: Video 6 Good practice in risk management

Transcript: Video 6 Good practice in risk management

Risk management is all about setting the right mindset and culture. You can have as many risk registers as you like. But at the end of the day, they won't do the action for you. Equally, having those risk registers is not enough. Identifying your risks is great, and it's a good start. But actually, nothing's going to change because you've written the risk down on a piece of paper. It's all about, actually, how do we manage those risks, and how do we control those risks in the future.
The things have that worked well for us in Network Rail is very much just bringing people together. So I do see myself and the central team as people that can join the dots. And it's an element that the business doesn't often have the capability to do. They're so stuck in their own bit. And I don't mean suck in a negative way, but the pressures of working their own part of the business means that that's where they are. And they don't always have access to other parts of the business or information other parts of the business have. And as a central function, that, for me, is one of the biggest peak value adds we can bring to risk management, to the organisation, is joining people together and helping people to understand what's happening somewhere else in the business.
I'm not doing dedicated risk management. I do it as part of what I do day in, day out. I cannot look at it in an isolated manner.
I do risk management by working with a whole group of what I would call coordinators across Rolls Royce where I work. And that's not just coordinators in one particular part of our business. It's all across the group. It's not just in the UK. It's internationally as well.
So I work extremely closely with them. They are the subject matter experts for their part of the group. My role is to knit together what they're telling me, to help them be prepared, but also to help them communicate their key messages up the organisation and necessarily up to the top of the organisation.
Most importantly, it involves people. And it involves people at all levels in the company. It involves the board in setting what we would refer to as the tone from the top, so what they expect to happen. It involves people in the middle of the organisation. So risk management is managed through the managers in the middle. And it actually involves people from the bottom up who are actually enacting or doing a lot of the risk management, either controls or actions or identifying risks. And that buy-in from the bottom is also really important.
So one of the core things we have in my organisation, which has been incredibly successful, is our approach to training. A number of years ago- in fact, pretty much 10 years ago- we had the- we wanted to look across our part of the organisation in terms of quality of risk management and the understanding of it. And we found, actually, that there was no real barometer to find out how good people were.
So we went against the process. We came up with a process of going out to market to some training. And we found that actually, there wasn't really anything out there that fitted what we wanted. So we created our own risk training in-house.
And we worked on the basis of gamification. So rather than people stuck in a room looking at PowerPoint, they play a series of games- or simulations, as we call them, so people don't think it's too lighthearted- to teach them the process, the behaviours required, and a little bit of information at same time. And it's been incredibly successful to date.
We've shared across sectors, with clients, with people actually in other organisations, full stop. And we're very proud of it. But what we find with gamification is that actually, by people being in teams and having a certain competitive element to it, the knowledge retained stays there far longer. And what is most incredible about it is really the whole business simulation we've put together. It was meant for a very wide and diverse population. So pretty much everyone within the company, at some point in their life, has sat through it. And we're very proud of it.
End transcript: Video 6 Good practice in risk management
Video 6 Good practice in risk management
Interactive feature not available in single page view (see it in standard view).

Now look at how good risk management can add value.

Download this video clip.Video player: Video 7 How good risk management can add value
Skip transcript: Video 7 How good risk management can add value

Transcript: Video 7 How good risk management can add value

In project risk management, it's important to do it right from the start, not when the project is running, even way before that. When you start to make your assumptions, your assessment on what the business case of it will be, this is when you need to put all the time in to understand what may go wrong. And you need to be mindful of that and need to provision for that, that need to be part of the business case, including those things that you will do in order to prevent them from happening. So this for the start.
Another thing in project risk management projects, nowadays, get more and more complex. So which on the one hand side means there is a lot of risk that you need to burn down in a very timely manner because the later you retire risks, the more expensive it will be if they hit you. So focus on those. You might deliver a safe thing a bit later. But don't rush to deliver something that may fall apart.
The other thing is ask of the complexity. Nowadays, many, many people are involved. Make sure that you bring in a culture of very good communication and openness on those risks. There might be things that are down there at the individual engineer level that might make the whole project fail. So make sure there is an openness to communicate these risks. These risks need to come to the right level getting the right attention to be managed in the right way and in a timely manner. It's going to be more expensive the later you do it.
When you then eventually have a good understanding right at the start of your project, what are all the things that can or cannot go wrong- all your uncertainties? You need to make sure that your financial plans reflect that asset contingency, likewise, not only your financial plans but your plans that you eventually execute time wise. They need to reflect all the things that you do in order to address those uncertainties, to address those risks, and eventually to deliver what you want it to say- what you want it to do.
Don't forget about if you're working in a project environment, you are not alone. It's not only your project. There are lots of other things that might interfere interact with you. The first are the projects. If another project may have a major shortfall, it might impact you, or it might actually consume the same resources that you look forward to use. So interact with other projects but be mindful of how they may interfere with you. So this is where it comes to master scheduling, bringing things together, and really make sure that those things, those uncertainties are managed as part of your schedule and as part of the master schedule.
The other bit that will definitely interact with you are functional areas, like finance for sure, if you plan for all your financial needs but likewise, others like legal if there are legal changes coming around that might affect you but likewise, things like your infrastructure, IT. There are lots of things that you will inevitably be impacted by if they, even outside your project, might go wrong. So mind that and stay in contact with those.
Important things about managing risk in a project are, A, take your time at the beginning. Really understand what you're up to and do all the precautions and all the mitigations that you need. There's a Chinese saying saying, "If you need to be quick, go slowly." Another thing is never assume you're better than your predecessors or the others, the other project. Make sure you learn from them. Take all the things that went wrong from other ends and make sure you accounted for those.
And last but not least, don't be optimistic. Make sure you have a balanced portfolio between things that can go right and can go even better and those that can go wrong. If you really keep the balance there, that will help you to deliver to your target. The ultimate difference between managing risk right- or managing risk right makes the difference between delivering and travelling on hope.
End transcript: Video 7 How good risk management can add value
Video 7 How good risk management can add value
Interactive feature not available in single page view (see it in standard view).

The main learning points that have been covered in this session are:

  • the variety of risk management specialisms
  • appreciating which of these specialisms may be appropriate for you currently or in your future career.
Download this video clip.Video player: Video 8 Risk management inspiration
Skip transcript: Video 8 Risk management inspiration

Transcript: Video 8 Risk management inspiration

I started off as an engineer. I did some engineering design and construction of chemical plants. I then went into project management and did some IT projects and programmes. I then went and did business strategy, and I then went and did some energy and commodity trading work.
And the common theme through each of those things was that where good risk management was done, the outcomes were better. The businesses performed better, the projects performed better. The chemical plants I designed were safer, were better places to work. The projects I delivered came in on time and delivered the promised benefits. The strategies that we came up with were far more robust and resilient to changing external circumstances. And the way in which we bought energy was far more effective and efficient because we'd done a proper, thorough job of risk management.
The company I now work in, risk management information is vital for us to deliver our promises to our shareholders and also to help us make the right strategic decisions going forward. And I think one of the things that's most encouraged me in my current role is we've been working very heavily with the strategy team and the leadership team, and we've actually seen a lot of our risk-based information help to steer the direction of the company in terms of its future products and activities and how it can best deliver excellent performance to its customers and also to its shareholders.
I actually started as an accountant. And very quickly, I decided I didn't really want to do the look back to what a company has achieved. I wanted to really be involved in that looking forward in terms of what could be around the horizon, what's around the corner, and also really helping the organisation to make sure it gets to that position that it's really striving to do. And for me, risk management is that combination of being able to work right across the company, talking to all types of different people with lots of different background.
So to me, risk management, the opportunity it brings to get involved is actually, you talk to a diversity of different people with different backgrounds, different experiences, whether it's engineering one day, finance another day, supply chain professionals, health and safety professionals, legal, right across the company. I think there are very few roles in a company which really allow you to go right across. But it's really about, then, how do you take some positive action to make things as successful as possible. It's really about the success of the company is what I find really makes me passionate about risk management.
End transcript: Video 8 Risk management inspiration
Video 8 Risk management inspiration
Interactive feature not available in single page view (see it in standard view).

Well done for completing the course! Now look at what you have learned overall from this badged course on risk management.

Risk management is important. It protects assets and adds value by making sure risk is taken in a conscious, competent way and in places where risk taking is rewarded – in other words it helps people make better decisions.

In procedural terms risk management is simple: we set targets (risk appetite), we identify risks, treat them and then review the outputs – then repeat. But risk is more than a process. We know this because incidents happen frequently at big firms who are excellent at following processes.

So why is this? Firstly it is because risk management is not just a process. Organisations are designed by, run by and governed by people. So for risk management to succeed it needs to involve people and help them to manage the risks they face.

Secondly risk management, even when done well, rarely means that the risk can no longer happen. Instead it means that the risk is less likely to happen or will have a lower impact – it improves the chances of things going right (or reduces the chances of things going wrong) but it rarely removes the risk completely. It is for this reason that managing risk is an ongoing activity, not a one-off event.

Finally risk management is a verb – a doing thing. Risk management delivers no value if no action is taken. These actions may be specific one off activities; they may be ongoing controls to reduce risk (providing they work!); it may be checking actions and controls are effective or using incident information to learn from risks that have happened. In all cases it is about doing something.

Download this video clip.Video player: Video 19 Last words
Skip transcript: Video 19 Last words

Transcript: Video 19 Last words

So risk management is not always about threats and the negative side of things. It's also about opportunities and positive aspects. Of if we did something that was potentially risky, could we actually benefit from it? So the thing I enjoy seeing that's part of everyday work is actually seeing the business taking positive risks and winning at it.
It's about getting involved with all areas of the business. The great thing about enterprise risk management is you can go across a company or organisation, even wider than that, and understand what those individual elements of the business do. And no two days are necessarily the same. There can be things like regularly reporting, things like that. But equally, you can be doing a risk identification workshop with someone one day in one area of the business, and you may be doing something entirely different the next day. It's a really useful way to understand how a business operates and what are the key things that make it tick.
I think the big grin is always caused by people if I'm honest. So it's when the chairman of the board references work that you've done. It's when your colleague says or your boss says, we couldn't have delivered this without you. It's when your colleagues say, we've just delivered some really important work here, which has made the business far stronger and far more robust. Those are the things that make me go home with a smile on my face.
The satisfaction comes from good preparation, when I see people that take risk management as a serious business tool, as part and parcel of their day job. And I just- their days run smoother. It's because they've done the preparation, they are in a more stable environment. And that, as much as boring as that might be, for me, that means that the business is running smoothly. I don't like surprises. I don't like being up and down and up and down. I would rather- I'm quite structured. I want to know everything is in its place, and it's all just ticking along nicely. Thank you very much. That's a nice day in the office for me.
One of my very famous things that I say all the time is that I've been in thousands of meetings in my lifetime and will probably go to thousands more. And the amount of those meetings where there's someone speaking about whatever it might be, and no one in that room understands what they're talking about. But everyone is just too hesitant to actually hold their hand up and ask that question. And they come out, and you see everyone turn round and say, what was he talking about? I don't know. Or they might have got it half an hour later, in which case, they've actually missed 20 minutes of good question or good thinking time that they could have had.
So for me, asking stupid questions is what it's all about. And the best people I've ever seen- very top levels, chief executive, CEOs and the vice presidents I've worked with in the past and the people I've met in some fantastic organisations, it's always the ones who aren't afraid to turn round and say, excuse me, what does that mean? That is what risk management is all about. Because if you don't ask those questions, then how can you make a decision based on that?
End transcript: Video 19 Last words
Video 19 Last words
Interactive feature not available in single page view (see it in standard view).

We hope that you have found this course useful and that it will help you take action to manage risks, to make better decisions and to achieve your objectives.


Take your learning further

Making the decision to study can be a big step, which is why you'll want a trusted University. The Open University has 50 years’ experience delivering flexible learning and 170,000 students are studying with us right now. Take a look at all Open University courses.

If you are new to University-level study, we offer two introductory routes to our qualifications. You could either choose to start with an Access module, or a module which allows you to count your previous learning towards an Open University qualification. Read our guide on Where to take your learning next for more information.

Not ready for formal University study? Then browse over 1000 free courses on OpenLearn and sign up to our newsletter to hear about new free courses as they are released.

Every year, thousands of students decide to study with The Open University. With over 120 qualifications, we’ve got the right course for you.

Request an Open University prospectus371