Risk Management – How to decide when a risk is worth taking

This article from Computing 16/7/09 by Colin Ashurst sprung out at me and is good advice when evaluating risk.


The article gives two good examples of when the focus of risk management should be on benefits realised, not technology delivered.

The first example is of a new IT director who questioned the imminent signing of a contract where he thought the quote was too high and succeeded in renegotiating the contract saving £500K (£2M total). Had he taken a risk managed approach focused on timetables/budgets, he would have wasted £500K and still delivered a successful project.

The second example saved another £500K as a result of a Project manager spotting an overlap between two projects in different parts of the organisation.

These approaches enable projects to save costs but create harder approval processes for innovative, higher risk, projects that could be better aligned to strategic objectives.

The correct approach is to manage risk by focussing on the IT investment portfolio and not just individual projects. Each project should be scoped to fit one of the following:

1. Strategic – Applications that contribute towards the strategy.

2. Key operational – Applications that the organisation currently depends for success, i.e. supply chain/warehousing.

3. Support – Investment that is valuable but not crirical to the business. Could be hundreds of these systems that soak up far too much money.

4. High potential – Investment that maybe important for future success.

The above provides the basis for a strategic approach to risk management. For example, key operational projects affect the core of the organisation – changing the engine without stopping the car and require a strong focus on mitigating risk. On the other hand, high potential projects are the place for innovation and taking risks but limiting the potential damage by keeping budgets/resources small. It also means recognising that some of these projects may fail.


About mubbisherahmed
I am passionate about IT and its ability to deliver cost effective, value for money solutions that can enhance performance and in many cases provide competitive advantage by using a range of solutions and approaches in innovative ways.

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