MONITORING AND

CONTROLLING RISK

MONITORING AND CONTROLLING RISK

Monitoring and Controlling Risk action phase of risk
management.
The earlier processes might phases
risk managers speculating on what bad (and good) events might happen,
what the consequences of these events might be, and what steps might be
taken to deal with them.

MONITORING
risk managers continually scanning the risk horizons to see what
untoward risk events are looming.
Monitoring risk events is like making periodic checks of the
pressure gauge on the boiler in the basement.
When in the green zone, everything is okay.
When it is in the yellow zone, we need to prepare for action.
When it is in the red zone, we need to take physical steps to reduce the
pressure.

CONTROL
the actual actions we take to handle the risk event.
If there is a fire in the kitchen, we put it out with a fire extinguisher or
throw baking soda on it.
If a computer system breaks down, we immediately switch all computer
activities to the backup system.
If the press reports that we are manufacturing defective products, we
launch
a public relations effort to minimize the damage to our organizations
reputation.

CRISIS MANAGEMENT
steps that need to be taken when dealing
with worst-case situations that can harm
peoples health and lives or can seriously
threaten the well-being of the organization.

MONITORING RISK
an information-gathering effort, carried out during the normal course of
business, with a view to determining whether any risk events have surfaced
and, if so, whether they are serious enough to warrant action.
risk identification carried out in the context of a specific undertaking, such as
launching a new project or exploring an investment opportunity, risk
monitoring is an ongoing, almost routine process.
Nothing specific is triggering the monitoring effort.
it is a preventive maintenance activity smart car owners change the oil in
their automobiles every three thousand miles
A large portion of risk monitoring is informal.

FORMAL RISK MONITORING

status
reports,

issues logs,

conducting of
evaluations,

periodic risk
audits.

STATUS REPORTS
Status reports are the most commonly used mechanism to on projects
and operations. usually issued monthly.
Ex: describe budget performance for the past month or identify milestones achieved
and missed, describe how many widgets were produced.

A common feature of status reports is that they focus on variances

from the plan.
Ex: a review of cost and schedule status for a project may indicate that it is 10
percent over budget and 12 percent behind schedule.

ISSUES LOGS
filled out monthly and are presented as part of the status report
for projects or operations.
divided into two portions:
The pending issues portion lists possible items of concern
The resolved issues portion of the issues log itemizes previous pending issues that
have been taken care of. The date when each issue was resolved should be
noted, so that management has an idea of how much time is being spent dealing
with issues

ADVANTAGES
provide a systematic way for employees to highlight concerns
they have about how things are going in the business. In a
sense, the employees are being asked regularly:
pressure on
employees to
handle risks
promptly.

EVALUATIONS
Evaluations are exercises in periodic stock taking.
checks that are conducted to see whether the fundamental
objectives of an undertaking are being achieved.

preliminary design reviews, critical design reviews,

pink and red team reviews, walk-throughs, audits,
management by-objectives (MBO) reviews
performance appraisal reviews

RISK AUDITS
conscious, systematic attempts to examine an organizations
projects, processes, and risk management procedures to
determine whether things are progressing smoothly or
whether problems lurk in the shadows.
conducted by risk audit teams of highly experienced men
and women who are trained on good risk management
practices.

PERILS OF RISK MONITORING

The monitoring effort must be focused on the right
sources of information.

The information must be timely.

The people reviewing the information must be able to
make sense out of it.

CONTROLLING RISK
risk handling,
steps that are taken to get risk events under control once they
arise.
If a newly released product fails to sell in the marketplace, a control action
might
be to implement a backup marketing plan.
If a project experiences severe schedule slippage, a control action might be to
trim back on its scope.

CONTROLLING RISK
Quite often, the way risk events play out does not match what
you anticipated during the risk assessment effort, however.

There is often a large gap between theory and practice. In this

case, the risk response team has to make some tough decisions.
Follow the plan, even though its relevance is questionable?
Abandon the plan and improvise? Do something else?

CRISIS MANAGEMENT
Managing crises is a special case of risk control
that has become a study area unto itself.
In view of the mishandling of notable crises over
the past few decades, many organizations have
developed crisis management centers.

CRISIS MANAGEMENT
Develop a Communication Plan
Establish a single point of contact
Maintain regular relations with the news media
Prepare public responses to different types of situations.

Communicate Effectively Once the Crisis Is Underway

Respond quickly
Be honest, and get your facts straight