A Note On Our Approach
"For over two millenia, Aristotle's logic has ruled over the thinking of Western intellectuals. All precise theories, all scientific models, even models of the process of thinking itself, have in principle conformed to the straight jacket of logic. But from its shady beginnings, devising gambling strategies and counting corpses in mediaeval London, probability theory and statistical inference now emerge as better foundations for scientific models, especially those of the process of thinking and as essential ingredients of theoretical mathematics, even the foundations of mathematics itself. We propose that this sea change in our perspective will affect virtually all of mathematics in the next century".
- David Mumford in “The Dawning of the Age of Stochasticity” (1999)
Necessary Sophistication
We find that many approaches to risk work are inadequate. Often they have a prescriptive process that does not produce answers in which clients can have confidence, or which is deficient in a significant way, say by ignoring completely operational issues when analysing capital expenditure. These methods can be biased towards adherence and away from suitability, intelligence and diligence. Sometimes a single software tool is applied resolutely in a wholly inappropriate way.
We found that to deliver the right answers, and to do so efficiently, perhaps in a single pass, we had to develop our own unique approaches, our own unique tools and finally our own systems of methods and tools that used the best of what was obtainable commercially and from academia. Some of our multi-tool and integrated methods we think are unsurpassed and allow us to take a big picture approach that goes right down to the detail so often called for in investment appraisal. We truly can make the analysis fit the problem.
Overview
The awareness of the risk exposure and the capability to deal with it should form an integral part of the overall strategy for the successful delivery a project. We know that the fundamental to this lies in the integration of the risk management process with the other project processes as well as, and perhaps more
important, promoting the process throughout the organisation with senior management buy-in and implementing the works led by a strong and proactive risk management team.
Our risk team has implemented risk analytics and management for many complex infrastructure projects. Our approach to risk management is to implement a structured, systematic and holistic framework of risk management activities to support the project in making informed decisions as early as possible - giving a more efficient and effective delivery of the project and hence increase the probability of success. We see risk management as having two roles - minimising the occurrence and impacts of threats and maximising the capture and realisation of opportunities.
We foster a culture of risk communication and awareness, appropriate and rapid risk response by all individuals at all levels within the project. Our risk management methodology can be summarised into four principal elements: analysis, assessment, assurance and culture (driving it all). Our approach aligns with recognised approaches and risk management standards.
We will work alongside the client’s preferred risk management systems and the team have wide experience of working in environments utilising enterprise risk management solutions. To complement these systems, we develop separate risk models in order to carry out appropriate and project specific quantitative risk assessments that, in the case of Crossrail, have been described as exceeding industry standards, by external reviewers in their report to Government.
We use these models in a way we think are specific to our risk approach:
- The monetary flows we model are elasticated: that is their value, timing and profile is variable according to the risks that affect them. The benefit of this is that annualised funding requirement – that is the contingency required to sustain the project, and to treat and to cover its risk exposure, can be determined to a desired level of confidence.
- When funding is, as is usually the case, constrained to an annually changing availability profile, we can solve the model to determine the expenditure and risk contingency targets needed to remain within the envelope.
- Our models are often non-trivial and incorporate advanced modelling that will give confidence in the analysis results. We call this concept ‘necessary sophistication’.
Our analytical methods further assures that we can devise coherent risk management plans for individual sub-projects to deliver their works to budget, quality and time supporting the success of the overall project. Further our approach will highlight the urgency in which the risk needs to be addressed and not just its overall impact. Far too often, smaller early risks are overlooked at the benefit of high risks that might not need to be addressed actively until far later.