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Ricardo (4s): Hello, everyone. Welcome to the five minutes PM Podcast Today. I'd like to discuss to you about Two Additional Dimensions of the risk analysis. We all know when we have a risk or a list of risks. Usually when we are doing qualitative or quantitative analysis. We evaluate basically two dimensions, probability, and impact, and the product between probability and impact is what we call exposition, the Risk exposition. So a bit basically we take, okay, probability lets suppose low is number one, medium is number two, high is number three. Impact the same. So you will have an exposition between one that is low-low, up to nine.
Ricardo (48s): that is high-high. Most of the people do this kind of analysis, but I want to present to you two other dimensions that you will find quite useful. The first one is what I call Urgency or time horizon. Urgency means the dimension of the risk related to how soon do we need to make a decision on the risk. How urgent is the decision on the risk means the risk will occur if it occurs sooner or later. So let me give you a very quick example. So let's suppose you have a supplier, the supplier is delivering two goods and one good is supposed to be delivered next week.
Ricardo (1m 31s): And the order goods is supposed to be delivered in one year and a half from now. Okay. It's the same, same supplier, and the same kind of goods. And you have a risk about the supplier delaying the delivery of this. So maybe the probability and the impact, if they are similar products, I would guess it's something similar. But what is the difference between these two risks? It's the concept of Urgency the first one that is next week is far more urgent than the second one that is one year and a half. So the Urgency adds this dimension on how fast, If you want to make a decision on the risk, you need to be effective.
Ricardo (2m 12s): So urgent risk, you cannot make a very long analysis because most of the time, the risk happens or not in 24 hours, 48 hours, 10 days. So it's not a very longterm, but the time horizon is very limited. The other one is what I call tendency. So remember probability and impact are most of the time, not static things. They evolve over time. So the probabilities can increase, can decrease. The impact can increase, can decrease. And by doing that, your exposition can increase or decrease or even stay the same. So what is a tenancy? Is how this risk behaves over time.
Ricardo (2m 56s): Mostly the exposition. So for example, I have a risk that over time it starts to deteriorate means the exposition started to grow. So this is a bad thing means over time, things get worse or maybe that the probability becomes higher or even the impact becomes stronger and more severe. We have in other cases where the tendency is going towards zero means towards no exposition, because over time, for example, the impact is dissolved by itself. So you'll have these two cases, and these two cases add to us in our risk analysis a new dimension.
Ricardo (3m 37s): So for example, you have two risks with the same probability and same impact, but maybe different tendencies. And maybe you will decide to use resources to answer quickly, the one with a negative tendency. That happens very quick, for example, in urgent. So this is exactly the dimension I want to suggest. So when you were preparing your risk register, you can add these two dementia. So instead of calling that exposition, just the product between probability and impact, you can create a mixed formula between probability, impact, Urgency, and tendency, and then you will have a number that will discriminate those events that are more urgent than the ones that are less urgent and also discriminate between the events that will have a positive tendency and those who will have a negative tendency, it's a very simple way of doing this.
Ricardo (4m 37s): It will improve your ability to use, for example, qualitative risk analysis in a little bit more effective way. I love doing by two by two matrix where I put plot risks, comparing probability and impact. This is the obvious one that everybody uses, but also probability and Urgency probability and tendency impact and Urgency impact and tendency and Urgency and tendency. And then I can map the Risk according to different dimensions. And this will give me without too much effort A much more profound analysis Of all of my risk register. So I hope you find this useful.
Ricardo (5m 17s): And you use this to improve your risk ability, so thank you very much, and see you next week with another five minutes PM Podcast.