Good financial risk management requires a high level team team effort and cross-functional collaboration. Risks, by their very nature, are highlighted precisely for the reason that the project team is unable to do anything about them. If they could be effectively mitigated or avoided by a single function (e.g. Legal, Finance, Operations etc) then they would/should not have been placed on a Risk Register.
“If the project were able to mitigate the risk themselves, alone, then it wouldn’t be a risk.“
Dealing with these risks, therefore, requires not only close collaboration from multiple functions but it also requires the delegation and intervention from pay-bands which are at a higher level than the project, i.e. effective management of financial risk is expensive. The corollary is that project teams should ensure that whatever risks they have identified are very important and cannot be dealt with by the project team.
Traditionally, risks that populate project risk registers will be well-known risks. To be unkind, these will be statements of the blindingly obvious. A menagerie of opinion, Google hits, speculation and wild guesses. In the absence of an external assurance function, risk managers work for Bid Managers or project teams. They are not incentivised to look too hard or too deeply at risk. The last thing that either of these roles want is prying executive eyes or torches shined into dark and dusty corners of the business.
“Most risk registers are populated with a menagerie of opinion, Google hits, speculation and wild guesses.“
Future blogs will go into this area in greater depth. However, in the absence of an external assurance function curious risk managers can assuage their intellectual integrity as well as supporting their boss by deriving their risks statistically. By going back through 6-10 similar projects they can analyse, categorise and classify risks by a variety of quantitative and qualitative measures. In this way, the Risk Manager will bring cross-functional experience to the project team and, hopefully, become a catalyst for inexpensive, collaborative risk management.