The concept of risk analysis and management has been around for many years, however it still isn’t executed well. Laurits Søgaard Nielsen, CEO at Visual Reporting believes the methodology behind assessing the risk in business projects needs to urgently be re-evaluated across enterprises in all industries to help them assess their risks more accurately. Indeed, his work recently with the Danish Government offers a compelling reason why quantifying the risks associated with projects is something most organisations should indeed be doing, to help manage both financial risk, and successful project outcome.
Visual Reporting develops analytical reporting and software solutions for organisations looking to understand the risk associated with certain activities. The company has been an @RISK user for some time, and the software is an integral part of the company’s solutions. It recently was tasked by the Danish Ministry of Finance to develop a software solution that would enable the Danish Government to abide by legislation that insisted all IT-based projects with a cost over €1.33m be risk assessed.
Originating from a model created by the Ministry, Visual Reporting developed an Microsoft Excel-based analytical spreadsheet with @RISK at its core that allowed individuals to enter the variation of each business case assumption – helping assess the monetary risk associated with their large scale IT projects. It allows users within the organisation to input data in a structured and well formed manner, as well as standardising the output for the management team so that business cases across the Government can be compared.
The Danish Government’s application is a key example of how businesses can do more to evaluate every aspect of a project and manage the risk more effectively. The methodology that most enterprises apply today is to evaluate only how much the project will cost, the benefits it will deliver and the value of that benefit in running the project – all using a single point estimate. However, using just single point estimates completely misses out the spread of the risk of running a project. Allowing people to assess the variation of each assumption entered, offers a far more compelling insight into the risk associated with the success or failure of a project.