Change Risk

The most fundamental part of good change management is an effective risk management process. As BP’s most senior auditor I found myself reviewing change management processes in many locations including diverse regions such as Russia, Houston, Brazil, Azerbaijan etc. I would always start my investigations by checking whether my colleagues had a well constructed risk management process – and that they actually used it. All of the change topics described on this site started life as risks to successful change management or transformation projects. If you have a comprehensive risk management process it should cover all the subjects described on this site but it should also include a number of risks which are unique to your own project.

Therefore it is worth your time designing and using a good risk management process for your change or transformation project. I have described the basic elements of risk management in my RiskTuition.com website (it is also free!). Many of the principles were originally introduced in my text book ‘Value TRAI Based Risk Management‘. On this page I will provide you with an overview of some of the key components of a good risk management system.

Risk Management summarised using Chris Dugglebys VALIUMM approach (FPSO Vessel photo courtesy of BP p.l.c.)
Risk Management summarised using Chris Dugglebys VALIUMM approach (FPSO Vessel photo courtesy of BP p.l.c.)

A few years ago I introduced the V&LIUMM formula as a simple way of remembering what the key components of risk management are. The first half of the formula (V&LI) is concerned with evaluating the risks and the second part (UMM) addresses what you do with the risks in your risk management action plan. Let me explain the main steps in a risk management process and I will point out where V&LIUMM fits in.

  1. Risk Identification – Start to process by trying to identify as many risks to the success of your change project as possible. Here the aim is to avoid overlooking any risks – a peer review/brain storming meeting with relevant experts can help.
  2. Risk Prioritisation – this is where V&LI is used. For each risk determine what its potential to destroy value (V) for the business is. Then estimate what is the likelihood (L) of the risk occurring – as a probability (e.g. a 1 in 2 likelihood of occurrence = a probability of 0.5). Multiply V x L to give an indication of risk importance (I). Prioritise your risk management resources based on this importance indicator.
  3. Understand the nature of the risks – Decide what it is that causes the risk in order to determine whether the risk occurrence can be prevented (these are ‘manageable’ risks). If the risk can not be prevented what can you do about its consequences to reduce (mitigate) its negative impact on the value of your business? (This is risk ‘mitigation’).
  4. Manage the manageable risks – Develop an action plan which addresses the causes of the manageable risks and stops them occurring (or reduces the likelihood of risk occurrence).
  5. Mitigate the risk consequences – For those risks which can not be totally prevented develop an action plan to reduce (or mitigate) their negative impact on the business.

At the end of this process you will have the basics of a risk management plan. This needs to be documented and risk action owners should be identified together with a timetable for their actions. More details about this process can be found on the RiskTuition.com site.

Chris Duggleby's RiskTuition.com site
Chris Duggleby’s RiskTuition.com site

Be careful not to fall into the trap of developing a good risk management plan and then simply sitting on it. The plan should be reviewed on a regular basis throughout your change project. If the project is expected to last a year the risk management action plan should be reviewed at least on a monthly basis. The review has four main purposes:

  • it raises the profile of the risk management process (make sure someone senior is in attendance)
  • it provides an opportunity to review the progress in carrying out risk management actions
  • if risk management actions are not being effective it provides a forum to review and improve them
  • new risks that were not apparent at the beginning of the process can be added at the review sessions

At this point, if you have worked through the whole of this site you will be armed with the basics of a good change management or business transformation process. Thanks for spending the time to look at the site and if you have any feedback or suggestions please use the comments box. As a reward for sticking it out to the end here is a little motivational video which came from the oil industry. Consider it a primer for the next site that I am currently preparing – about Joint Venture risks (the ultimate change or transformation project).

Chris Duggleby

©2015 ChrisDuggleby.com

All Intellectual Property Rights Owned by Chris Duggleby

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Managing Change and Transformation Risks – a Chris Duggleby Site

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