Practical Project Risk Management
SERIES ARTICLE
By Martin Hopkinson
United Kingdom
Purpose
Assign risks to the most appropriate individuals and organisations
Two aspects of Risk Ownership
Projects take into account at least two aspects of risk ownership:
- Risk Owner: The individual who is accountable for the management of each risk.
- Risk Bearing Organisation: The organisation(s) that bear the impact of risk(s).
Importance
Risk owners: risks that are not owned are often not managed. Clarity about personal responsibilities thus increases process effectiveness.
Risk bearing organisation: understanding how the impact of risk will be borne is a useful means of understanding how the organisations involved are likely to behave. The concept of risk-bearing organisation is therefore a useful tool for contract design and negotiation.
Linking the two aspects of ownership: people work on behalf of organisations. This linkage can be used to sense check a project’s risk management plans.
Recommended Approach
Risk owner: Select the person who has the most influence over the risk’s outcome. Selecting the risk owner in this way usually involves considering the source(s) of risk and identifying the person who is best placed to understand and implement the appropriate course of action.
Risk-bearing organisation: the organisation that bears the financial consequences. If there are no financial consequences, consider the impact on the project benefits or product.
The recommended risk-bearing organisation approach reflects the fact that money can usually be transferred in a way that time and product impact cannot. Identifying the risk-bearing organisation usually involves understanding how the obligations of parties defined by agreements, e.g. contracts, are related to the transfer of money. Sometimes risk is shared, particularly if there is a mutual benefit to be gained from doing so.
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Editor’s note: This series of articles is by Martin Hopkinson, author of the books “The Project Risk Maturity Model” and “Net Present Value and Risk Modelling for Projects” and contributing author for Association for Project Management (APM) guides such as Directing Change and Sponsoring Change. These articles are based on a set of short risk management guides previously available on his company website, now retired. For an Introduction and context for this series, click here. Learn more about Martin Hopkinson in his author profile below.
How to cite this paper: Hopkinson, M. (2022). Risk Ownership: A brief guide, Practical Project Risk Management series, PM World Journal, Vol. XI, Issue V, May. Available online at https://pmworldlibrary.net/wp-content/uploads/2022/05/pmwj117-May2022-Hopkinson-risk-ownership-practical-risk-management-article.pdf
About the Author
Martin Hopkinson
United Kingdom
Martin Hopkinson, recently retired as the Director of Risk Management Capability Limited in the UK, and has 30 years’ experience as a project manager and project risk management consultant. His experience has been gained across a wide variety of industries and engineering disciplines and includes multibillion-pound projects and programmes. He was the lead author on Tools and Techniques for the Association for Project Management’s (APM) guide to risk management (The PRAM Guide) and led the group that produced the APM guide Prioritising Project Risks.
Martin’s first book, The Project Risk Maturity Model, concerns the risk management process. His contributions to Association for Project Management (APM) guides such as Directing Change and Sponsoring Change reflect his belief in the importance of project governance and business case development.
In his second book Net Present Value and Risk Modelling for Projects he brought these subjects together by showing how NPV and risk modelling techniques can be used to optimise projects and support project approval decisions. To learn more about the book, click here.
To view other works by Martin Hopkinson, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/martin-hopkinson/
