Value and Risk Appraisals
Get the right balance of value and risk
Value is a complex interaction between the utility of the assets delivered by an investment and the cost of that investment. Many organisations do not have a clear view of what constitutes value in their environment. This means that they are not able to act with certainty in uncertain times. The full value of the assets thay have is not understood or optimised. They may always seek short-term results without protecting their longer term future.
Risk is an inherent concern in any change initiative - will it work, are we attempting too much or too little, what will people say and how will they react? In many projects and programmes, risk management initiatives either do not occur at all or are done as a mere checklist formality early in the delivery initiative.
The three most common criticisms of overall risk management are:
- Risk management is applied inconsistently, if at all;
- Risk management is reactive, it's not prioritised and supported by a risk budget;
- Risk management receives limited buy-in and support, and may be perceived as focussing on the negatives of a project.
We use the guidance on risk management provided by ISO 31000, the PMI PMBoK, the APM BoK, MoR, PRINCE2, MSP and MoP, and our extensive experience in Government, industrial, Defence and commercial environments to develop an overall appreciation of the 'known unknowns' (i.e. threats and opportunities) associated with a change initiative, and recommend effective approaches to the 'unknown unknowns' that can come out of left field. We can help organisations develop governance and oversight functions to monitor and control the aggregate risk profile of project portfolios, programmes and projects. And we can review existing analyses and arrangements, and where necessary recommend and implement improvements.
Our reviews can be broad or focussed on critical aspects of risk management, such as:
- Risk appetite;
- Risk governance, including higher-order frameworks in an organisation, including compliance with established procedures;
- Specific risk categories or major risks, and the effectiveness of current or proposed miigation approaches.
We use the guidance on value management provided by AS 4183, the SAVE Value Management standard, MoV and our extensive experience to develop a Value Study Job Plan.
The Job Plan can be as broadly or as narrowly focussed as necessary for the delivery initiative, and could cover such aspects as:
- Value study workshops, to generate consensus among stakeholders about what the delivery inititive is really about;
- Function analysis, which provides the basis of a better understanding of the delivery initiative, to support decisions based on value and generation of innovative proposals to improve value;
- Development of a value tree for the delivery initiative, to articulate stakeholders' value priorities;
- Development of value-improving proposals (VIPs);
- Scenario building, mixing and matching combinations of VIPs to identify optimal value-for-money propositions.
Value Studies are opportunities to review and challenge assumptions as well as encourage creative and lateral thinking in order to derive better value solutions to service delivery requirements. In many instances, the results may lower costs without compromising organisational needs, better fit the purpose for which resources are allocated, ensure that deliverables meet current requirements, reduce recurrent/operational costs, improve communication and afford opportunities for innovation.
Combined Value and Risk Studies
We believe that a combined study provides participants with a common understanding that each unique value scenario comes with its own unique risk profile. We believe that the key risks in any delivery initiative are the risks that the promised value might not be realised. Participants will then understand why their commitment to manage such risks is one of the mandatory prerequisites for approval of the delivery initiative.
A Value and Risk Study should be conducted as part of identification of a delivery initiative, Each Value and Risk Study should make recommendations about next steps.
To find out more about our approach to value and risk reviews, contact us today.