A Risk Reduction strategy must be initially based on not only identifying risks and quantifying them, but to also realise two other important factors:
- Uncertainty in the risk quantification, and
- Correlation between all risks
A great deal of Private Finance Initiative Risk Registers contain potential issues that are inadequately understood, and thus are not managed correctly. In addition, the overall monies appearing in Risk Registers may initially appear to be, on some occasions, huge and can lead to projects appearing to have low value for money.
apm’s approach to Risk Reduction has always been to ensure we not only better understand each major risk, but ensures risks are adequately correlated to others. This has been gained via experience from a number of high value Private Finance Initiative projects; however, the overall approach ensures that costs associated with risks and their uncertainties are initially minimised via risk correlation, prior to pursuing other Risk Reduction activities, such as Risk Transfer and other Mitigation methods.
As well as Risk Reduction, apm has always used this process to also drive out potential opportunities: we have focused on reducing existing risk and adding further value through observing other commercial, financial, or technical opportunities through the Risk Register.