Systemic and Systematic Risk Management

Description

This book discusses risk management as it applies to problem-solving for simple, complex and wicked problems faced by policy creators and implementors, project managers and systems engineers in the context of policies, large engineering projects (LEPs), projects and systems. When applying systems thinking to risk management, it can be seen that risk management applies to almost every action taken in daily life. This book: Introduces the systems approach of integrating risk management into policy creation and implementation, project management and systems engineering, such as the risk framework and the Firm Fixed Price (FFP) contract with penalties and bonuses. Introduces a number of out-of-the box concepts building on the application of the systems thinking tools in the system thinker’s toolbox. Points out that integrating risk management into policy and project management and systems engineering is just good management and engineering practice. Discusses the flow of risk in a policy from creation through implementation via LEPs and simpler projects, identifying where risks arise and where they should be dealt with. Presents the risks in the relationship between policy creation, implementation, project management and systems engineering. Discusses risks throughout the policy implementation process and shows how the nature of risks changes from political to financial to technological as implementation proceeds. Discusses managing complexity and specifies the minimum number of elements in a system for it to be defined as, and managed as, complex. Points out that in most instances the traditionally ignored major implementation risk is that of poor performance by personnel. Shows how to proactively incorporate prevention into planning in order to prevent risks, as well as how to mitigate them when they occur. Cover Half Title Title Page Copyright Page Dedication Table of Contents Preface Acknowledgements Author Chapter 1 Introduction 1.1 How to Read and Use This Book 1.2 The Traditional and Systems Approaches to Risk Management 1.3 The Contents of This Book 1.4 The Systems Approach 1.5 The Systems Approach to Problem-Solving 1.6 The Major Risks in Any Activity 1.7 Summary References Chapter 2 Thinking 2.1 Judgement and Creativity 2.2 Critical Thinking 2.3 Brainstorming 2.3.1 Requirements for Brainstorming Sessions 2.4 Systems Thinking 2.4.1 The Two Distinct Types of Systems Thinking 2.5 Beyond Systems Thinking 2.5.1 The HTPs 2.5.2 Active Brainstorming 2.6 Using the HTPs to Perceive Systems 2.6.1 A Camera 2.6.2 A House 2.6.3 A Car 2.6.4 A Policy 2.6.5 Further Examples of the Use of the HTPs 2.7 Exercises 2.7.1 The ENU Traffic Light Upgrade 2.7.2 The Engaporean Maid Reduction Policy 2.7.3 The Engaporean Drought Relief Policy 2.7.4 The Off-World Mining Policy 2.8 Summary References Chapter 3 Risks and Risk Management 3.1 Big Picture 3.1.1 Every Action Taken Involves Risk 3.2 Operational 3.2.1 The Risk Management Process 3.2.2 Communicating with the Public and Other Stakeholders about Risks 3.3 Functional 3.4 Structural 3.4.1 Categories of Risks 3.4.2 Definitions 3.4.3 Hierarchies in Which Risk are Managed 3.4.4 The HKMF 3.5 Generic 3.6 Continuum 3.7 Temporal 3.8 Quantitative 3.8.1 Perceptions of Probability 3.8.2 Perceptions of Reliability 3.8.3 Estimates Associated with Risks 3.8.4 The Risk Rectangle 3.8.5 Risk Profiles 3.8.6 Risk Trees 3.9 Scientific 3.10 Exercises 3.10.1 The ENU Traffic Light Upgrade 3.10.2 The Engaporean Maid Reduction Policy 3.10.3 The Engaporean Drought Relief Policy 3.10.4 The Off-World Mining Policy 3.11 Summary References Chapter 4 Change 4.1 Continuum 4.1.1 Desirable and Undesirable Changes 4.1.2 Types of Change 4.1.3 Stakeholder Grouping 4.2 Temporal 4.2.1 The Four States in the Change Lifecycle 4.2.2 Changes are Risky 4.2.3 Changes Take Time 4.2.4 Changes Tend to Fail 4.3 Big Picture 4.4 Generic 4.5 Functional 4.5.1 Resistance to Change 4.5.2 Force Field Analysis 4.6 Structural 4.7 Operational 4.7.1 CM Models 4.8 Scientific 4.9 Change and CM in Risk Framework Layers 3 and Below 4.9.1 Impact of Change 4.9.2 The CM Process 4.10 Exercises 4.10.1 ENU Traffic Light Upgrade 4.10.2 The Engaporean Maid Reduction Policy 4.10.3 The Engaporean Drought Relief Policy 4.10.4. The Off-World Mining Policy 4.11 Summary References Chapter 5 Problems and Problem-Solving 5.1 Perceptions of Problem-Solving 5.1.1 Big Picture 5.1.2 Quantitative 5.1.3 Structural 5.1.4 Continuum 5.1.5 Functional 5.1.6 Operational 5.1.7 Scientific 5.2 Complexity 5.2.1 Structural 5.2.2 Continuum 5.2.3 Temporal 5.2.4 Scientific 5.3 Remedying Well-Structured Problems 5.3.1 The Two-Part SDP 5.3.2 The Multiple-Iteration Problem-Solving Process 5.4 Remedying Ill-Structured Problems 5.5 Remedying Complex Problems 5.5.1 Remedying Well-Structured Complex Problems 5.5.2 Remedying Ill-Structured Complex Problems 5.5.3 Remedying Wicked Problems 5.6 Simultaneously Remedying Multiple Problems 5.7 Generic Risks in the Problem-Solving Process 5.8 Exercises 5.8.1 The ENU Traffic Light Upgrade 5.8.2 The Engaporean Maid Reduction Policy 5.8.3 The Engaporian Drought Relief Policy 5.8.4 The Off-World Mining Policy 5.9 Summary References Chapter 6 Systems and Systems Engineering 6.1 The Nature of Systems 6.1.1 Big Picture 6.1.2 Operational 6.1.3 Functional 6.1.4 Structural 6.1.5 Temporal 6.1.6 Generic 6.1.7 Continuum 6.1.8 Scientific 6.2 Properties of Systems 6.2.1 States 6.2.2 Emergence 6.2.3 Failures 6.2.4 Subsystems 6.3 Hierarchies of Systems 6.3.1 Principle of Hierarchies 6.3.2 Mission and Support Subsystems 6.4 Supply Chains as Systems 6.4.1 Supply Chain Functions 6.4.2 Characteristics of Integrated Supply Management 6.5 An Introduction to Systems Engineering 6.5.1 The Waterfall Chart 6.5.2 The ‘A’ and ‘B’ Paradigms in Systems Engineering 6.5.3 The Three Types of Systems Engineering 6.5.4 The Difference between SETA and SETR 6.5.5 The Eight Different Camps of Systems Engineering 6.5.6 The Five Layers of Systems Engineering 6.5.7 Problem-Solving and Systems Engineering 6.5.8 The Interdependency and Overlap between the Systems Engineering, Project Management and Other Engineering Activities 6.5.9 Systems Engineering Documentation 6.6 Modelling and Simulation 6.7 The Nine-System Model 6.8 Risks in Systems and Systems Engineering 6.8.1 Risks in Systems 6.8.2 Risks in Systems Engineering 6.8.3 The Perennial Problem of Poor Requirements 6.9 Exercises 6.9.1 The ENU Traffic Light Upgrade 6.9.2 The Engaporean Maid Reduction Policy 6.9.3 The Engaporian Drought Relief Policy 6.9.4 The Off-World Mining Policy 6.10 Summary References Chapter 7 Basic Project Management 7.1 Pure and Applied Project Management 7.2 The Top Seven Risk-Indicators or a Project in Trouble 7.2.1 The Tally 7.2.2 The Priorities 7.2.3 The Top Seven 7.2.4 Sensitivity Analysis on the Project Management Risk-Indicators 7.2.5 The ‘Other’ Category 7.2.6 Validating the Survey Results 7.2.7 Conclusions 7.3 Projects 7.3.1 Project Attributes 7.3.2 The Triple and Quadruple Constraints of Project Management 7.3.3 Project Organization 7.4 The Project Lifecycle 7.4.1 The Project Initiation State 7.4.2 The Project Planning State 7.4.3 The Project Performance State 7.4.4 The Project Closeout State 7.5 CRIP Charts 7.5.1 The Five-Step CRIP Approach 7.5.2 Populating and Using the CRIP Chart 7.5.3 Advantages of the CRIP Approach 7.5.4 Disadvantages of the CRIP Approach 7.5.5 Examples of Using CRIP Charts in Different Types of Projects 7.6 ETL Charts 7.7 Management by Exception 7.7.1 The Key Ingredients in MBE 7.7.2 Advantages and Disadvantages of MBE 7.7.3 Using MBE 7.8 Management by Objectives 7.8.1 MBO in the Project Planning State 7.8.2 MBO in the Project Performance State 7.9 U sing ‘Prevention’ to Lower Project Completion Risk 7.10 Stakeholders and Stakeholder Management 7.11 Software Project Risks 7.11.1 High Risk 7.11.2 Medium Risk 7.11.3 Low Risk 7.12 Generic Project Risks 7.13 Exercises 7.13.1 The ENU Traffic Light Upgrade 7.13.2 The Engaporean Maid Reduction Policy 7.13.3 The Engaporean Drought Relief Policy 7.13.4 The Off-World Mining Policy 7.14 Summary References Chapter 8 An Introduction to Managing Risk in LEPs 8.1 Large Engineering Projects 8.2 Risks in LEPs 8.2.1 Completion Risks 8.2.2 Market-Related Risks 8.2.3 Institutional Risks 8.2.4 Contracts 8.2.5 Uncontrolled Changes 8.2.6 Negotiation 8.3 The LEP Lifecycle 8.3.1 The LEP Initialization State 8.3.2 The LEP Planning State 8.3.3 The LEP Performance State 8.3.4 The LEP Closeout State 8.4 Risks Based on the Non-availability of Technology 8.5 The TAWOO 8.6 Exercises 8.6.1 The ENU Traffic Light Upgrade 8.6.2 The Engaporean Maid Reduction Policy 8.6.3 The Engaporean Drought Relief Policy 8.6.4 The Off-World Mining Policy 8.7 Summary References Chapter 9 Perspectives of Polices 9.1 Quantitative 9.1.1 Policy Problems are Complex Problems 9.2 Big Picture 9.2.1 Policies Exist within a System 9.2.2 Policies Have Reasons for Their Existence 9.2.3 Policies Have Stakeholders 9.2.4 Policies are Instruments of Change 9.3 Continuum 9.3.1 The Different Categories of Policies 9.3.2 Some Policies Succeed and Some Policies Fail 9.3.3 Policies are Only One Way of Implementing Changes 9.3.4 Policies May Have Unintended Consequences 9.3.5 The Continuum of Care 9.4 Generic 9.5 Operational 9.5.1 The Generic Policy Lifecycle and Associated Risks 9.6 Functional 9.6.1 Politics 9.7 Temporal 9.8 Structural 9.8.1 Policy Documents 9.9 Scientific 9.9.1 A Way to Create and Implement a Successful Policy 9.9.2 A Reason for the Confusion between Complex Problems and Wicked Problems 9.10 Exercises 9.10.1 The ENU Traffic light Upgrade 9.10.2 The Engaporean Maid Reduction Policy 9.10.3 The Engaporian Drought Relief Policy 9.10.4 The Off-World Mining Policy 9.11 Summary References Chapter 10 Afterword Author Index Subject Index