PMGT5871 Chap.9 Risk Identification, Assessment and Treatment
Risk Identification, Assessment and Treatment
Risk planning identifies events that might happen, rates and quantifies them, and decides how to respond. This chapter defines uncertainty, sources, hazards, risks, issues and cascading risks, compares the identification techniques taught in Week 7, and applies qualitative rating on a likelihood and impact matrix.
It then calculates exposure as probability times impact for a pre-treatment and post-treatment risk profile and explains the treatment strategies for threats and opportunities and the contents of a risk register. Risk combines vocabulary, judgement and arithmetic, which makes it a natural source of both quick recall items and short calculations.
The Week 7 tutorial builds a risk register for the first case study in a fixed order: identify risks individually and then by brainstorming, assess them qualitatively, choose treatments, quantify them, and complete the register. Following that order in an answer shows the marker that the process, not just the result, is understood.
What this chapter covers
- 01
Uncertainty, sources, hazards, risks and issues
- 02
Cascading risk and its treatment
- 03
Risk identification techniques
- 04
Qualitative risk assessment and the risk matrix
- 05
Quantitative assessment and exposure
- 06
Pre-treatment and post-treatment risk profiles
- 07
Treatment strategies and the risk register
Worked example · free
Calculating a risk profile before and after treatment
- 1Pre-treatment exposures: $20,000 for R1 and $24,000 for R2.
- 1Pre-treatment profile: $44,000.
- 1Post-treatment exposures: $5,000 and $6,000, a profile of $11,000.
- 1Compare: $9,000 of treatment removes $33,000 of exposure, so both are justified.
Key terms
- Issue
- A risk that has occurred and is now a problem to be managed.
- Cascading risk
- A new risk created by a treatment strategy or by an issue.
- Residual risk
- The risk that remains after a treatment strategy has been applied.
- Nominal group technique
- An identification method in which each participant lists risks individually before the group collates and discusses them.
- Risk transfer
- Shifting a risk's consequence to a third party through contract terms or insurance without changing its likelihood.
Risk Identification, Assessment and Treatment FAQ
How is risk exposure calculated?
Where the impact of a risk is quantified financially, it is multiplied by the probability to give the exposure. Summing the exposures of the high-priority risks gives the pre-treatment profile, and repeating the calculation on residual risks gives the post-treatment profile.
Does transferring a risk reduce its likelihood?
No. The Week 7 slides note that transfer through contract terms or insurance shares the risk without changing its likelihood. Mitigation is the strategy that reduces probability or impact, leaving a residual risk to reassess.
What is the difference between the nominal group and Delphi techniques?
Both ask people to identify risks individually before pooling them, which stops dominant individuals setting the list. The Delphi technique also keeps participation anonymous, which helps when a risk involves a powerful stakeholder.
What is the difference between a risk and an issue?
A risk is an event that might happen, with a threat being a negative risk. An issue is a risk that has already occurred, a problem that now needs to be managed. Issues can also create cascading risks that need their own treatment.
What treatment strategies apply to opportunities?
The Week 7 slides list accept, where no specific action is taken; exploit, which actively pursues the opportunity to increase its likelihood; and enhance, which maximises its benefit by increasing the impact if it occurs.
What is the difference between qualitative and quantitative risk assessment?
Qualitative assessment judges likelihood and impact as high, mid or low and applies them to a risk matrix to rate and prioritise risks. Quantitative assessment replaces those judgements with numbers, such as a probability and a dollar impact, and calculates exposure.
Exam move
Write the risk vocabulary as a chain, from uncertainty to source, hazard, risk, issue and cascading risk, and give one example of each from a project you know. For identification, pair each technique with the weakness of open discussion it fixes. Then build a three-line risk register with qualitative ratings, exposures, treatments and residual exposures, and check that each treatment costs less than the exposure it removes.
Finally, sort the treatment strategies into those that change likelihood or impact and those that only move or accept the consequence, since that distinction is the most frequently tested. When you write a register line, keep the treatment and the residual assessment side by side so a reader can see exactly what the treatment bought.
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