Risk factors and the initial ranking in the risk profile can only be a guide to priorities for management attention, due to the constraints of the procedures used to generate them. Accordingly, a two-stage process is commonly used to set priorities. 1. Risks are sequenced in decreasing order of risk factors, calculated by the processes described above, and cut-off levels are set to provide an initial indication of priorities.
The risk factors are usually based on assessments generated by the technical or commercial specialists and managers responsible for individual elements. The initial cut-off levels may be set by the manager. The choice of cut-off levels may be based on absolute criteria (for example, if safety issues are involved), pragmatic criteria related to the resources available for managing high-risk elements, or on more sophisticated trade-offs between the costs of developing detailed Risk Action Plans for major risks and the benefits of doing so. 2. Each risk in the sequenced list is examined to determine whether it has been classified correctly, and the classification is modified accordingly. In this stage, similar risks may be grouped, to be managed together. This task may be undertaken by the manager alone, but it is often preferable for other specialists and managers to be involved as well. This facilitates better communication, understanding and ‘ownership’ of the main risks.
Figure 5.7 illustrates the outcomes from a semi-quantitative analysis of a technical project after it had been reviewed. Risk factors were assigned to project areas, using a process similar to that described above; initial cut-off points were set, and then each area was reviewed and its priority adjusted where necessary. The figure shows the 34 project areas, sorted first by agreed priority and then by risk factor. There is considerable overlap in the risk factors between the High, Medium High, Medium Low and Low categories, justifying the value of the review process in determining the overall priority rating for each area of the project.