The Perception of Risk - Assignment Example

NATO Name Institution Course Tutor Date (ii). A systems map (iii). an influence diagram (iii). A multiple cause diagram (b). Explain how using each of these diagrams has developed your understanding of the project. A rich picture A rich picture is an informal macro-level view of a real-world cooperative work situation. It shows the characters (roles), working context, internal and external environment. This presents a holistic view of a cooperative work environment. This is used to get an overall picture in the requirement gathering stage of the project. A rich picture is one of the wonderful ways of engaging local stakeholders and allowing them to tell the story of the project. In the construction, a rich picture makes easy all stakeholders in getting to grips with the rich picture form of presentation. A rich picture is really insightful and there is a great deal of honesty as to current problem and issues (Fishhoff, Slovic & Lichtenstein, 2001). The honesty, related to one of the known powers of the rich picture tool when undertaken in an action research process where issues of vulnerability are expected and respected. The rich picture is adapted within the NATO construction to provide stakeholders with the opportunity to express the stakeholder’s wider concerns- and in line with the research question for the construction, considering deeper issues than those pertaining purely to information use and project, and to set theses out in the context of the potential success or failure of the construction project (Slovic, et al. 2004). The rich picture also allowed visual metaphors of corruption (money being diverted), intervention of government in project affairs and internal frustrations as well as the more prosaic matters of information flow and delivery. Drawing a rich picture is an essential part of conceptualizing a problem if one is following the project. However, the rich picture can also be extremely useful even if one is following a less rigorous approach. In a rich picture one can use a cartoon approach to capture as much information as one can, concerning what is happening in the situation one is examining. For example, what is involved, what their relationships are, what difficulties are being faced and so on (Viscusi, 1999). System maps One can use system maps to who is involved in a given situation and what their relationships are at a given moment in time. It is very essential when one is trying to decide which different people are involved in a given situation, what their relationships are and what their relative significance is. Drawing a system diagram, adding, deleting and moving actors around is good physical activities that will discipline one’s thinking and assist one reflect more carefully about everyone involved (Cox, 2008). The most significant part of drawing a system map is this modification and reflection process, rather than ending up with a definitive statement about actors and their relationships. For example, through a system map, one can know what is actually taking place in the workplace at that particular time, and then draw another that represents what one thinks should be taking place, and then compare the differences (Slovic, et al. 2004). Influence diagrams Influence diagrams was useful for exploring the way the actors within a situation have influence over, or effect, each other at a specific moment in time. It is important also to note that an influence diagram can include concepts and physical entries as well. Multiple Cause Diagram Multiple Cause Diagrams can be used to explore the various reasons why something is happening; they are therefore extremely useful tools for trying to uncover the root causes of a problem. Creating a multiple cause diagram was helpful in untangling one’s thinking about a given situation and will assist provide one with a valuable tool that ne can use to communicate this thinking to other people. Multiple causes diagram is only used to show cause-and-effect relationships, not sequences of actions or influences. Question Two Managerial/contractual, technical, social/political risks as identified. Risks Risk Type Managerial/contractual a) Inappropriate management structure (The success of construction projects hinders largely on the decision-making capabilities of the management team and the professional interaction within the group. Personnel attitudes and interaction of the management team can affect the decision-making process, frequently with adverse consequences for the project (Brington & Foy, 2007). b) Confused management policies (Construction projects are documents intensive, and administered in a variety of ways that are frequently dictated by owner requirements or by governmental policy. As a consequence, contract administration and compliance is a process-intensive, detailed-oriented, and often tedious exercise whose importance cannot be overlooked (Affect, 2000). c) Poor contractual relations d) Negative attitude of participants (Risk management entails the process of identification, assessment and prioritization of risks and then successively followed by coordination and economical application of the existing resources so as to reduce, monitor and control the outcomes of the unfortunate events. The negative attitude of the participants is however very hard to control and so considered hard. e) Poor relations between members or states constituting to the project f) Poor managerial personnel quality Hard Hard Hard Hard Hard Hard Technical a) Design errors or variations (The project has experts from the members of NATO and this will make sure that only the experts are employed and so the design errors or variations might not occur) b) Latent site conditions (Has a very low probability of occurrence) c) Material/labour/plant shortage (This might happen suppose the infrastructure are impassibly, the risk has a very high probability of occurrence and so considered hard risk) d) Uncertainties due to technology use e) Bad weather and soil type (Ideally, every project should address environmental issues during the planning and design phase of the project. The issues characteristically go around extraordinary regulations, permits, and approvals needed by state, or federal bodies, and can take important amounts of manpower and time and sometimes can be considered as risks. f) Uncertainties in other geographical conditions Hard Soft Hard Soft Soft Soft Social/political a) Threats to the constructor’s life b) Political interference (It enables economies of cost to be secured by the synchronization of design, procurement and construction so avoiding the delays and diseconomies inherent when designers, purchasing agencies and construction contractors belong to different organizations. c) Rejection by the local residents d) Depending on the size and complexity of the project, the employer may find that his choice of firms to complete for the work is very limited due to the increased costs of tendering and the scale of engineering, managerial and financial resources required (Affect, 2000). e) Changes in political policies (Can be easily controlled and has minimum impact on the construction process and the project completion) f) Changes in government (Some of the environmental changes do not affect the project) g) Changes in international relations (The internal relations great affect the cooperation and hence the project completion. Without proper internal relations, the project cannot be completed) h) Environmental protection (Suppose the local residents and the government decides to control their environment by not permitting the construction, the project might come to standstill (Kasperson, et al. 1998). However, due to minimal resistance and few opposes, the process in unlikely and so can be considered soft) i) Public safety regulation (The country is a member of NATO and so will offer minimal or no resistance to the construction) Hard Hard Soft Soft Soft Soft Hard Soft Soft To what extent do you feel that the systems approach is of assistance in risk management? A system approach in risk management is the science of recognizing, analysis, and reacting to danger all through the project life and in the most excellent interest of fulfilling project aims. A frequently overlooked aspect of project management, risk management can often result in significant improvements in the ultimate success of projects and this can only be achieved suppose the risk is identified systematically using the system approach (Cox, 2008). Risk management through system approach, might have a positive effect on projects selection, determining the projects scope, and initiating practical schedules and cost approximations. Risk management through system approach assists the project stakeholders in understanding the project nature, involving project members in examining strengths and weakness, and assists in the integration the project management (Fishhoff, Slovic & Lichtenstein, 2001). A system approach is effective in identification of some risks that cannot be identified by other methods. With crisis management, there is an obvious danger to the success of a project and this is carried out through system analysis. The crisis, in turn, receives the intense interest of the entire project team. Resolving a crisis has much greater visibility, often accompanied by rewards from management, than successful risk management. In contrast, when risk management is effective, it results in fewer problems, and for the few problems that exist, it results in more expeditious resolutions (Oyatta, 2004). It may be difficult for outside observers to tell whether risk management or luck was responsible for the smooth development of a new system, but project teams will always know that their projects worked out better because of good risk management. Managing project risks takes dedicated, talented professionals. From this mixing of ideas and market changes is emerging an approach to corporate risk management. This new approach uses the technology of both finance and insurance to address the whole range of corporate risks-financial, insurable operational and business risk. In its coverage, this new approach is comprehensive. Where risk comes from is of secondary importance. Insurable and financial risks are both able to disrupt earnings, create funding problems for new investments, or bankrupt the firm. Moreover, the contributions of each source of risk cannot be conveniently isolated (Kasperson, et al. 1998). Risk does not simply “add up.” The ability of a firm to tolerate any one risk is determined by its current exposure to other risks. These considerations call for a comprehensive, or integrated, strategy in treating risk. The characteristics of this new integrated approach are: It is designed to support optimal investment. The new risk management is based largely on the proposition that, when the firm is exposed to risk, it may be unable to make optimal investment decisions (Toft & Brian, 2000). This can occur in two ways outlined above. First, risks impose the possibility that the firm will run out of cash and be unable to finance new and replacement investment. Second, the risk may give rise to opportunistic behaviour as shareholders and managers seek investments that maximise their welfare at the expense of creditors (Oyatta, 2004). With these problems recognized, risk management strategies are designed to ensure that makes optimal post-loss and pre-loss investment decisions. These financing strategies entail post-loss contingent financing. Other costs of risk arise because risk enhances certain transaction costs. Risk do increase expected taxes or their probabilities. Risk increases bankruptcy costs and can promote frictional costs between shareholders and creditors, thereby increasing the cost of debt. Lack of proper risk identification results to worse conditions and so the need for a system approach (Brington & Foy, 2007). Risk management is concerned with reducing these frictional costs. This can be done by removing risk, by tax management, or by changing the financial structure of the firm. A system approach in risk management is inclusive as it helps to identify majority of risks. The reasons why risk is costly to the firm do not depend much on where the risk came from. Losing a billion dollars might bankrupt a firm regardless of whether the loss arose from a liability suit, a sudden change in exchange rates, a loss of a key contract, or a turn in the economy (Paul, 2000). Thus, the new risk management usually embraces all types of risk: financial risk, organizational risk and insurable risk. A system approach is coordinated but discriminating. The need for coordination arises from the basic feature of risk: that individual risks cannot be isolated. Many cash flows can be volatile. But the combined risk from all these cash flows is not simply the sum of the parts. Risk does not simply “add up.”The ability of a firm to tolerate any one risk is determined by its current exposure to other risks (Michael, 2004). Even if risks are independent of each other, they combine to impose less total risk than the sum of their parts. This is the virtue of diversification. Thus, if I have one risky cash flow, it can make sense to ensure it. But with fifty similar risky cash flows, their combined relative risk can be low and the need for insurance of each minimal. Bibliography: Affect, R. (2000). Risk and Rationality, Risk Analysis, 24 (2), 311- 31 Brington, P. and Foy, D. 2007. News Values. London. Sage Publications Cox, L. 2008. What’s wrong with Risk Matrices? Risk Analysis, 28(2). Disaster, Annual Review of Sociology, 25, 271- 305 Fishhoff, P. Slovic and S. Lichtenstein. 2001. How Safe is Safe Enough? A Psychometric Study of Attitudes towards Technological Risks and Benefits, Policy Sciences, 9, 127-152 Kasperson, R. E. et al. 1998. The social amplification of Risk: A conceptual Framework, Risk Analysis, 8(2), 177- 201 Michael, M. 2004. The Risk Management of Everything. London. Demos Publishers. Oyatta, T. 2004. Risk as Analysis and Risk as Feelings: Some Thoughts about. Macmillan publishers. Paul, O. 2000. The perception of Risk. London. Earthcan publishers. Slovic, P. et al. 2004. Risk as Analysis and Risk as Feelings: Some Thoughts about Affect, Reason, Risk, and Rationality, Risk Analysis, 24(2), 311 Toft, H. and Brian, G. 2000. Limits to the Mathematical Modeling of Disasters, Accident and Design: Contemporary Debates in Risk Management, (Hood and Jones, Eds.). UCL/Routledge. London. Viscusi, D. 1999. The Dark Side of Oragnizations: Mistake, and Misconduct. London. Macmillan publishers. Read More