Assumptions

Until we develop the ability to see the future, projects and programmes will have to be run in the face of uncertainty.

In the absence of complete information, assumptions will have to be made. Otherwise decisions cannot be made and activities will stall. At least some of these assumptions are documented in the projects. In the more badly run projects, the assumptions are there uncritically reviewed. Because a project is proceeding as if these assumptions are valid, it is critically important to review the assumptions.

You are trying to cross a bridge and making the assumption that the floor is sound. You have several choices: make the assumption, and proceed to walk normally as if the assumption is correct. You can also make the assumption, keeping in mind that you could be wrong, and proceed with caution, testing every step to see if the assumption holds. You can also, before, proceeding, inspect the bridge, and gather more information about the assumption. How likely is the assumption to be correct? How likely is it wrong? Apart from
physical inspection you can observe the environment. Are locals crossing the bridge? Are there local experts who know if the bridge is sound?

Because the assumptions are the 'floor' on which the programme will be proceeding, it is critical to review these assumptions to see how sound they are. These assumptions should be looked at with the following filters:

• Are they complete? Are these the only critical assumptions?
• Are they valid? Are we making assumptions about things that are not already known to be false?
• Do we have a plan for reviewing the assumptions at a later date, when we may have more information and able to verify or reject the assumptions.
• Have we identified the risks that will arise if the assumptions on which we are proceeding are proven false?

ERM is an Integrative Approach to Risk Management

Risk management as traditionally practiced in organisations, tended to be silo-based.  Risks originating from one area is expected to be managed in that area which is assigned the responsibility for managing, while risks originating from another area is managed by that area. 

One reason Chapman gives as to why this approach developed is our tendency to compartmentalise. Our analytical mindset approach to problem solving leads us to split things into their basic components, to make them easier to manage. 

Over the years, there have been growing recognition that the silo-based approach is flawed.  The impact of risks span across silos -- a breakdown in manufacturing leads to impacts well beyond the manufacturing department.  Mismanagement of risk in one silo affects other silos, which may not be prepared for that risk because they had assumed that other area was managing that risk.  

ERM is a new approach to managing risk.  The thrust is of ERM is the integrative management of risks, understanding the interdependencies, their impacts, and areas where they can be leveraged so that addressing a single cause can prevent multiple risks.

Reference: Chapman, Robert. Simple Tools and Techniques for Enterprise Risk Management 2006.

Tools and Techniques of Enterprise Risk Management, Part 1

I’m going to go through Robert Chapman’s ERM book.  Based on the table of contents, the first part of the book what ERM is. Part II is about ‘The Appointment’ or what I think is a discussion of the engagement process.  The table of contents covers topics about interviewing the client, preparing the proposal, and implementation (of what, I am not sure yet).

Part II covers the Risk Management Process.  It seems to be about a fairly standard process: Analysis of the Business, Risk Identification, Risk Assessment, Risk Planning, and Risk Management.

Part IV covers ‘Internal Influences’ which I think is about internally generated risks.  The table of contents says it covers Financial Risk Management, Operational Risk Management, and Technological Risk.

The final part covers ‘External Influences’ which seems like about risks generated externally.  It discusses Economic, Environmental, Legal, Political, Market, and Social risks.

Finally there are 14 short Appendixes which discuss techniques like SWOT, PEST, VRIO analysis, Change Management, among other topics.