Ideally the business plan will still be an early draft, because your understanding of that business plan will change during your risk journey. By the end of the journey you will want to update the business plan. You will also have auditable ‘risk’ documents. Those documents will explain the decisions you have made in annual planning.
The first step is validating the unit’s objectives. ‘Risk’ is meaningless without the objectives.
You validate the unit’s objectives for the year by re-generating them. You use an approach specifically designed to achieve clarity and assurance.
The re-generated objectives will recognise the potential for unplanned side-effects from your unit’s activities. The objective may simply be to avoid some kinds of side-effects. These objectives are important for assurance, even if they were not mentioned in your business plan.
The objectives are the outcomes that the unit delivers for the organisation. The boss should agree to the objectives you recognise, and may be closely involved in developing those objectives. If you’re in a place where you can’t discuss what the organisation needs, the objectives are what you must deliver to protect your own position.
You begin to re-generate objectives by asking big questions. You then apply some precision engineering to the draft objectives. The precision engineering will expose new questions, so you loop back to answering those, which will lead to more engineering. At the end of the loop, you have a set of objectives that are essential, complete, separately important, and unique to your unit.
It’s important not to confuse the real objectives with the outcomes that you know how to measure. Important outcomes can and should be measured, but the measurement details don’t tell you what’s really important. Formal measurement of outcomes is not part of the risk work.
After crystallising those objectives, you can decide which objectives need immediate risk attention for satisfying the boss on the business plan. You can come back to the other objectives after the boss is satisfied.
You understand each objective only when you see how success and failure are different. To see that difference, draw pictures.
To really understand an objective, you need to see a picture of success, and pictures of outcomes other than success.
The pictures are of your world as it might be at the end of the planning period. That is, they show alternative outcomes.
You will need a line of pictures for each objective. Each line of pictures runs from the best to worst imaginable outcome, including planned success and various compromises in between.
These lines of pictures prove your understanding what your unit of trying to achieve. If you don’t understand the objectives well enough to draw the pictures, you will not be able to evaluate risks.
Within the risk work, you use the pictures to understand the effect of possible events and wrong assumptions—that is, of ‘risks’. Each ‘risk consequence’ is just one of the pictures. The picture shows directly the effect of the risk on the achievement of your objectives.
The outcome pictures must show your real world as it might be at the end of the planning period.
Your pictures must achieve many qualities to do their work.
For any one objective, the pictures show different outcomes, and evoke different feelings. You draw the destination, not the journey.
Your pictures of success outcomes must be realistic in view of recent history, and in view of what the organisation expects. But even the most unlikely outcome pictures are important as possibilities that stay unlikely.
Smaller work units inside your own can define objectives and draw pictures in the same way.
After you have drawn the pictures, you can compare the re-generated objectives and pictures with the original business plan. You should also compare them with the objectives and outcome pictures for those of lower- and higher-level work units.
You do quite a bit of work to get to this point, but the effort pays for itself well before you get to answer the boss question about confidence in the business plan.
You will use the outcome pictures to understand the significance of unplanned developments during the year.
You can get value from your outcome pictures throughout the risk work, through the year, and beyond the end of the year.
You will use the collection of pictures in place of a standardised ‘consequence scale’. You can also make the collection look like one of those.
In everyday words, the outcome pictures are a reference for understanding the importance of unplanned events and mistaken assumptions that might occur.
You have now set the ‘risk management context’, as understood in the International Standard ISO 31000. For business plan risk, the picture collection is a better representation of consequence than any pre-cooked standard consequence scale. (The idea of a standardised ‘consequence scale’ is not even mentioned in the International Standard, despite any impression you might have received from past risk training.)
You have also solved a lot of the problems that usually make the analysis of particular risks so difficult.
You can use your pictures of planned and unplanned outcomes for more than ‘risk management’. Your pictures may also form the basis for performance reporting, forecasting, and so on throughout the planning cycle.
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