Risk Management

R is k

U P S ID E D O W N S ID E

R is k a s H a z a r d R is k a s U n c e r t a in t y
R is k a s O p p o r t u n it y

F in a n c ia l L o s s S u p p ly / D e m a n d
I n n o v a t io n F ra u d R e g u la t io n s
I n it ia t iv e P r o d u c t R e c a lls T e c h n o lo g y
E n t r e p r e n e u r s h ip C o n t a m in a t io n C o m p e t it io n
Consequences of Risk

 Implementation difficulties leading to >> loss of benefits

 Cost overshoot

 Time overshoot

 Technical degradation of end product

 System incompatibility with hardware/software

 McFarlan Framework

Low Structure High Structure

Large Project Low Risk (very Low Risk

susceptible to
mismanagement
Low Technology
Small Project Very Low Very Low Risk
Risk(susceptible
to
mismanagement)
High Large Project Very High Risk Medium Risk
Technology
Small Project High Risk Medium-Low
Risk
Basic Terminology of McFarlan Risk Framework

 High Structure – nature of task defined and frozen.

 Low Structure – Goals not clear at start of project-will evolve.

 Low Technology – technology is familiar to the co.

 High Technology – technology unfamiliar to the co.; substantial

learning curve involved.
 Classifying High Priority Risks

FAMILIAR FUTURE UNFAMILIAR FUTURE

NOT WELL EQUIPED Manageable Risk Factors Strategic Risk Factors

Previously lucky? Learn from others
Learn from the past New capital and/or strategy
Add capabilities Import capabilities

WELL EQUIPED Business As Usual Risk Adaptation Risk Factors

Factors Experience may not be
Experience is valid helpful
Management response System/infrastructure
response