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Musings by the Tao Of Risk

Quantitative Versus Qualitative Risk Impact

Qualitative measures are highly influenced by someone's position and past experience, so something considered "high" to someone can be perceived as low or totally unimportant to the next person. Conversely, quantitative measures are explicit and not open to interpretation. I see risks logs that list the impact as “major,” “significant,” “substantial,” etc. There is no universally accepted definition of “significant” so one person’s “significant” may seem trivial to others. Without quantitative risk impact there is no way for an organization to understand their total risk exposure and whether they are within the risk tolerance levels established by the organizational risk policy. To effectively mitigate risk, its impact to the project must be quantitatively documented so treatment activities can be measured and tracked. It makes no sense to spend $50,000 treating a risk event that represents $10,000 in budget impact. Quantitative risk impact is a frequent topic of debate with pundits who argue that the uncertainty of risk makes it impossible to quantitatively measure.

Jack Jones Writes Forward for Cultural Calamity

A BIG THANKS to Jack Jones for writing the forward for my new book Cultural Calamity: Culture Driven Risk Management Disasters and How to Avoid Them.  

One of the most important factors in successful risk management is organizational culture.  Unfortunately, few organizations take the risk management aspects of their culture seriously or even know how to address them when there are concerns.  There are a number of factors that drive this, including:

Potemkin Villages and Risk Culture

A Potemkin Village is a term used to describe situations where a thinly veiled facade is created with no underlying substance. Legend has it that Grigory Potemkin became Governor of Southern Ukraine and Crimea after the Russian takeover in 1774. Potemkin was assigned to rebuild the areas after a series of wars between the Ottoman Empire and Russia. In 1787, the Russian Empress Catherine II and her entourage embarked on a six-month trip through the Ukraine and Crimea. To assure his continued favor with Catherine II, Potemkin is reported to have built a fake portable settlement along the banks of the Dnieper River. Each night after Catherine II and her entourage passed the village, Potemkin would have the village disassembled and reassembled further down river to give the impression of a thriving, prosperous economy however, reality was quite different. Many people question the authenticity of the legend but, true or not, the fact still remains that organizations do construct facades with very little substance behind them.

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