Four friends wanted to start a business. After much discussion they had hit upon the idea of launch Show more Four friends wanted to start a business. After much discussion they had hit upon the idea of launching a mail-order toys and games business. They were in the development stage of their business plan and wanted to be sure that they had been thorough with their planning. To reinforce this they had just received a letter from a group of venture capitalists agreeing to fund the start-up. It concluded its review of their plan by stating: The business plan presents a credible opportunity for all involved and we are prepared to approve the funding request subject to a risk analysis being carried out on the project to start the business. The group were stunned the funding that they had been hoping for was suddenly a reality. Just one thing stood in their way that damned risk analysis process. They started with identifying the key risk elements that could face the business during its start-up phase. They considered the process between the time that they received the funding and day one of trading. What could possibly go wrong? Lots of things. They brainstormed the possibilities and recorded them. They then considered the effect that these would have on the project as a whole. The list they generated provided them with too much to do they would spend all their time trying to prevent things going wrong and not enough making sure that the positive steps towards the business opening were happening. They needed to prioritise the events. As importantly what would happen when they eventually occurred? Who would be responsible for each of them? On what basis could they rank each risk in order to identify the most important risks for which they would develop mitigation and ownership? They decided to use a table to show the risk event its likelihood and severity and then multiplying the two ratings together to provide a risk priority number (RPN). This would then allow ranking of the risk elements. For the three highest ranked elements the group then generated a mitigation process with someone in the group taking ownership of that process. The result of their deliberations is shown in Table 10.8. As can be seen the top three risks were identified and mitigation tasks put in place to either prevent the risk event happening or to reduce its effect. The initials of the owners of that risk in the last column show who has agreed to monitor that set of events and ensure that the mitigation is put into place before the project suffers from that event occurring. Table 10.8 Simple risk management table Answer these questions: 1. What further methods could have been used to generate ideas for the identification part of the risk process? 2. How scientific can the method that was used to rank the risks claim to be? 3. What should happen as the project progresses to manage risk? Suggest a plan for the remainder of the project (the three months up to the business launch). Show less

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