Risk Management

I use the ABCD (Assumption Based Communications Dynamics) risk management methodology for projects or operational delivery. I really like this approach because of its simplicity, clarity and that it starts with making positive assumptions. A company I worked with used what they called the ‘DAIR’ – a register of the dependencies, assumptions, issues and risks. The problem with this approach is that one man’s issue is another man’s dependency – everyone has a different view on which is which. So by asking people to state everything as a positive assumption, you have everything in one place where it’s easier to manage.ABCD Example

So what is the ABCD methodology? Quite simply, you state everything as a positive assumption, then classify these assumptions on a four point scale, where A = good and D = bad, according to their stability (how likely is it that the assumption is true) and their sensitivity (what is the impact if the assumption is not true). Anything with a classification of C-C or above should be managed as a risk, with mitigation plans and contingency. So in the above example of three assumptions, we can see that I should have a mitigation plan in place for my retirement, e.g. a personal pension.

The methodology has several advantages:

  • Simplicity – one list of assumptions vs. several lists of issues, risks, dependencies, etc.
  • Clarity – it immediately identifies the risky assumptions
  • Communications – by creating a common vocabulary around risk, everyone associated with the project getsĀ on board with the analysis and outcomes

Once the risky assumptions are identified and classified as risks, the methodology goes on to quantify the financial impact and the urgency, or timeliness, of the identified risks. The financial impact could be an estimate of financial loss should the assumption be false, or of the additional up-front costs to take corrective action and de-risk it, i.e. raise the probability that the assumption is true or that the impact is mitigated. The timeliness aspect identifies immediate vs. longer term issues and helps with prioritisation and planning. Collectively, the ABCD methodology forms an excellent foundation for project reporting and governance, bringing focus at the steering level on what is truly important and the level of urgency.

If you’ve got a strategically important project or an element of operational delivery that needs de-risking, please get in touch.