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Project Manager : Project Manager June July 2012
www.aipm.com.au Project Manager 21 Action plan According to the UN report cited earlier, accounting for disaster losses is “a first step towards taking responsibility for, and assessing, disaster risk”. It claims that “adapting existing development instruments such as national public investment planning, conditional cash transfers and temporary employment programs can help to scale up disaster risk management efforts to reach millions of risk-prone citizens. Such strategies reduce disaster risk.” Neil Plumridge says black swan events are tricky because these incidents are outliers. “ When Lehman Bros hit the skids, one of our clients did modelling around the valuation of its loan book and, over 20 years, the loan values had only ever fallen by 15 per cent. But in some sectors, loan values were down by 50 per cent during the GFC, which is something no one could have predicted.” But, says Plumridge, there is certainly value in businesses performing stress tests. “Mitigation strategies strengthen the organisation’s ability to respond when significant events occur and build managerial resilience so that if a black swan event does happen, the right resources are in place to respond.” When it comes to planning for a black swan event, Paul Campbell says a key consideration is the physical environment around a project. “ You might consider building physical structures such as sea walls and avoid construction in flood-prone areas. But I’m not sure in commercial or political life that people look that far ahead – hence we have situations like the Queensland floods. This situation possibly could have been planned for. With something like the GFC, financial markets do conduct stress testing, but don’t plan for that magnitude.” He says enterprise risk planning is a useful tool. “Stress testing is important in terms of modelling project deliverables because so many variables can impact them. But when something like the GFC affects those deliverables, its effect on prices is very hard to identify.” Colin Earp says enterprise risk management is important so that entire projects are audited for risk to allow senior management to get a good handle on events that have the potential to impact the success of a project. “At the end of the day, good risk management is about proper sponsorship, clear leadership and an open culture. “ With black swan events, everything comes back to oversight. You need good early-warning systems and, if a risk is identified that is beyond the control of management, this should be a red flag for the project.” ••• COvER STORy • mosT sponsors won’T plan for or even consider a blacK swan assess your risK If there is one positive from a black swan event, it’s that it forces organisations to assess their attitude to risk, something that has the potential to add a lot of value to any company. Government departments and financial institutions are quickly finding that backing up their servers is no longer enough – many large corporate offices in christchurch during the 2011 earthquake quickly found themselves with an operating base that was offline for weeks, with no way to access vital information in order to continue operations. Paul bonello, Senior Manager of operational risk and compliance at anZ said that a risk management plan has already been in place for some time to mitigate future scenarios. “anZ relies heavily on Emergency Services recommendations in guiding decisions we make to ensure staff safety and the ability to maintain our own assets and infrastructure to support our customer network,” bonello says. For example, anZ's response to cyclone yasi focused on the availability of cash for recovery efforts and short- term support for customers and staff impacted by the disaster. Such efforts entail a working base in the cloud, and the use of software such as Microsoft SharePoint – used by 78 per cent of the Fortune 500. ultimately, a risk management strategy is a project manager’s friend. It helps ensure that attitude to risk is in alignment with the project’s outcomes and communicated up the management chain. www.aipm.com.au Project Manager 21
Project Manager April May 2012
Project Manager Aug Sept 2012