ABCD Risk Management

What is ABCD?

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Assumption Based Communication Dynamics (ABCD) is essentially a formal methodology that enables the capture of differing knowledge and viewpoints from stakeholders, in a form that facilitates communication of issues, assumptions and ensures pro-active management of risks. By dramatically improving communication, risks are avoided or managed proactively and objectives are delivered on time and to budget.

ABCD works where other risk management approaches fail. One of the main reasons for this is that ABCD focuses on positives (ie assumptions) rather than negatives (ie risks) and is therefore seen as a positive exercise by people who would normally feel uncomfortable with a “risk assessment”.

ABCD is fully scaleable – it can be used on everything from small projects to large scale programmes and full business enterprises. Most importantly, ABCD is a true enterprise risk management approach in that it handles all the hierarchies and escalation profiles that traditional methods normally fail to address and therefore ensures that management can “see the wood from the trees”.

The key features and benefits of ABCD are:

Communication – Provides a simple, common, language for the communication of risk up, down and sideways within the organization, whilst avoiding the normal problems of political sensitivity and dislike of discussing risks.
Control – Enhances project control by an exception management approach and provides a simple overview of complex risks for senior management to prompt decision making
Flexibility – An adaptable process which, once tailored, is rigorously applied to ensure that all significant risks to the projects are identified and controlled at the appropriate time.
Acceptable – The non-intrusive/non-bureaucratic management process improves management discipline across the organization and is readily accepted by project teams

 

Assumption Analysis 

The core of ABCD is Assumption Analysis. This uses structured techniques to analyse plans and associated documentation and identify the most sensitive assumptions that are potentially unstable, and therefore the source of greatest risk.

Everything is rated on an ABCD scale; where A is always good and D is always bad. This provides an instantly understood assessment on each assumption, forces people to express their feelings (ie there is no “medium”) and effectively provides guidance on how best to attack the risk (i.e. stabilise the assumption or de-sensitise the project to the effects of the assumption going wrong).

Risks are therefore identified through individual assessment of Sensitivity and Stability. However, further risks are identified by cross-communicating the non-risky assumptions to other stakeholders. In this way, critical risks that would never have been identified by traditional methods are captured and mitigated.

The “risky assumptions” identified are reprioritised to provide simple summary risk profiles that senior management can quickly assimilate and provide an accurate prioritised picture of the projects exposure to risk.

 

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Quality Based Costing 

How can we avoid the budget or timescales of the programme spinning out of control? Quality Based Costing is a process within ABCD that can be used to define the cost, timescale or benefit risk within a project or business area from as early as the proposal stage. It works by adding a quality dimension to the estimating process so that high quality estimates, based on relevant experience, are treated differently from low quality estimates which are little more than guesses.

 

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The output takes the form of a probability distribution diagram and a set of risky assumptions that need to be managed in order to move the curve to the left and squeeze it (i.e. reduce the likely final cost and the uncertainty). Quality Based Costing is particularly useful in the early stages of a project/enterprise when the final cost is subject to great uncertainty. The process has also been effectively used to define business budgets for re-structured business areas, where one plus one is very unlikely to equal two.

Assure TM web-based tool

Assure TM is a web-based tool that allows the data captured to be easily managed and reports produced (eg Risk Registers). The information is viewable through any browser so that communication is made easier across your intranet or internet, with appropriate security.

For example, assumptions may be reviewed by all stakeholders in the programme. In this way risks that would be missed by any traditional risk management approach are captured through the identification of inconsistent or contradicting assumptions.

Assure also provides full Monte Carlo analysis capabilities to support the Quality Based Costing (QBC) technique including integration of driving assumptions with the probability curves.

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