Risk management in Etablissement Kazoza et Compagnie-Rwanda

2.2 Risk management plan

Some experts have said that a strong risk management process can decrease problems on a project/business by as much as 80 or 90 percent (www.executivebrief.com)

There are four stages to risk management planning; Risk Identification, Risks Quantification, Risk Response and Risk Monitoring and Control ( www.projectperfect.com).

2.2.1 Risk Identification

It consists of identifying and naming all possible risks. The best approach is a workshop with all staff to carry out the identification by using a combination of brainstorming and reviewing of standard risk lists ( www.projectperfect.com). Other researchers have identified other methods to identify risks by using a risk calculator (www.referenceforbusiness.com). The risk calculator measures three kinds of internal pressures: risk stemming from growth, corporate culture, and information management. Using the risk calculator, managers can determine if their company has a safe or dangerous amount of risk.

Although the risk calculator is not a precise tool, it does indicate areas where risks and potential losses exist, such as the rate of expansion and the level of internal competition.

2.2.1.1 Objectives of Risk Identification

The objectives of risk identification are to identify and categorize risks that could affect the project and document these risks. The outcome of risk identification is a list of risks. What is done with the list of risks depends on the nature of the risks and the project. On noncomplex, low-cost projects with little uncertainty (few risks), the risks may be kept simply as a list of red flag items. The items can then be assigned to individual team members to watch throughout the project development process and used for risk allocation purposes. On complex, high-cost projects that are by nature uncertain, the risks can feed the rigorous process of assessment, analysis, mitigation and planning, allocation, and monitoring and updating described in this document (Highways Agency 2001).

The risk identification process should stop short of assessing or analyzing risks so that it does not inhibit the identification of "minor" risks. The process should promote creative thinking and leverage team experience and knowledge. In practice, however, risk identification and risk assessment are often completed in a single step, a process that can be called risk assessment. For example, if a risk is identified in the process of interviewing an expert, it is logical to pursue information on the probability that it will occur, its consequences/impacts, the time associated with the risk (i.e., when it might occur), and possible ways of dealing with it. The latter actions are part of risk assessment, but they often begin during risk identification (Federal Highway administration, 2005).

2.2.1.2 Risk Identification Process

The risk identification process begins with the team compiling the risk events. The identification process will vary, depending on the nature of the project and the risk management skills of the team members, but most identification processes begin with an examination of issues and concerns created by the project development team. These issues and concerns can be derived from an examination of the project/business description, work breakdown structure, cost estimate, design and construction schedule, procurement plan, or general risk checklists. The team should examine and identify events by reducing them to a level of detail that permits an evaluator to understand the significance of any risk and identify its causes, (i.e., risk drivers). This is a practical way of addressing the large and diverse numbers of potential risks that often occur on highway design and construction projects. Risks are those events that team members determine would adversely affect the project (Highways Agency, 2001).

After the risks are identified, they should be classified into groups of like risks. Classification of risks helps reduce redundancy and provides for easier management of the risks in later phases of the risk analysis process. Classifying risks also provides for the creation of risk checklists, risk registers, and databases for future projects (Federal Highway Administration, 2005).

Numerous techniques are available to facilitate risk identification after documents have been reviewed. Brainstorming, scenario planning, and expert interviews are tools commonly used. The nominal group method allows each team member to create a list individually. The Delphi method is a process in which each team member individually and anonymously lists potential risks and their inputs. The Crawford slip method allows the team to individually list up to 10 risks. Afterward these risks are divided by the team into various categories and logged by category. Influence or risk diagramming is explained in the "Probability or Decision Trees and Influence Diagrams". Nominal group, Delphi, Crawford slip, and influence diagramming also serve as good tools for risk assessment, which is often blurred with risk identification (Operations, 2005)

The key to success with any risk identification tool or technique is to assist the experts in identifying risks. People and the agency's risk culture are the keys to continuous risk identification and risk management. The documents and techniques should only support the people in the risk assessment process and never inhibit or replace the engineering judgment required for a comprehensive risk identification process (United States Department of Labour, 2003)

The risk identification process identifies and categorizes risks that could affect the project/business. It documents these risks and, at a minimum, produces a list of risks that can be assigned to a team member and tracked throughout the project/business development and delivery process. Risk identification is continuous and new risks should continually be invited into the process. The tools and techniques should support the risk identification process, but it will be the people involved in the exercises who are most critical to the success of the process (Highways Agency 2001).