Risk Priority vs. Risk Urgency
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By Marian Haus, PMP
How do you identify the most important risk(s) to focus on during a project? It is the essential challenge of risk management.
One technique is the qualitative risks appraisal—using qualifiers to assess risk importance. Two popular qualifiers are risk priority and risk urgency. While the terms can have overlapping meanings, they each reflect different qualitative dimensions of project risks.
The Terms Defined
Risk priority combines the assessed likelihood of a risk to occur (i.e. risk probability) and its projected impact. Risk urgency, on the other hand, is a different risk dimension. It reflects the time criticality of a risk to occur.
By assessing risk priority, project managers can identify and focus on the high-priority risks. By appraising risk urgency project managers can ascertain the time left before measures or responses would need to be implemented. With risk priority the main focus is on the impact, whereas with risk urgency the main focus is on the measures or responses that are to be implemented in a timely fashion.
I see risk priority and risk urgency as complementary dimensions of risk management. They both deserve an equally important treatment from project managers.
Assessing Priority and Urgency
For some projects, project leads might treat risk priority and urgency separately. For others, they might combine the risk priority and the risk urgency to amplify the risk priority.
When treated separately, a very common approach to assess priority is the (probability x impact) matrix. Additionally, a (impact x urgency) matrix helps project managers focus on the high-impacting and immediate risks.
When treated together a (priority x urgency) matrix can help project managers assessing the risk severity, which is a derived qualitative risk dimension.
Here are two examples:
Risk #1: Our database will exceed its available disk-space capacity during the project.
Probability: Medium (considering the data volume increase observed over the past x months)
Impact: High (considering this could lead to business interruption and financial loses)
Urgency: A response might be needed in 4 to 6 months (the project runs for 12 months)
The (probability x impact) matrix will rank this risk as a high priority risk, yet the low urgency will categorize the same risk in a (impact x urgency) matrix as requiring monitoring rather than immediate action.
Risk #2: An approaching heavy storm may lead to power outages in our manufacturing line.
Probability: Medium (considering this has happened a few times in the past and our power reserve infrastructure is reliable)
Impact: High (considering this could lead to temporary production standstill)
Urgency: Verify immediately the status of the power reserve capacity
The (probability x impact) matrix will tell us that this risk cannot be ignored and the (impact x urgency) matrix will tell us that this risk requires immediate action and continuous risk monitoring.
The big takeaway: Risk #2 is both a priority and urgency risk.
How do you distinguish between risk priority and risk urgency?
Posted
by
Marian Haus
on: November 17, 2016 04:36 PM |
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Comments (12)
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Rami Kaibni
Community Champion
Senior Projects Manager | Field & Marten Associates
New Westminster, British Columbia, Canada
Marian, I like the way you simplified Impact Vs. Urgency. Very nice Blog.
Karthik T
Senior Engineering Manager| Nike
Bangalore, Karnataka, India
Well compiled article with examples. Thank you.
Quinton van Eeden
Enabling Quality Decisions by Addressing Uncertainty| TPG GRC
Johannesburg, Gauteng, South Africa
It is the 'likelihood of an impact resulting from risk" not "the likelihood of the risk itself" - see ISO 31000:2009 and Cooper D, et al. (2014) Project Risk Management Guidelines: Managing Risk with ISO31000 and IEC62198. John Wiley & Sons, Chichester, UK.
Conducting a sensitivity analysis during the quantitative assessment of the impact of risk on estimates of schedule and cost is the only way to determine risk treatment priorities. This will include the correlation between the effects of identified risk events/conditions - the example above seems to assume independence of identified risk.
COSO defines "risk priority" in terms of the allocation of resources whereas the FMEA technique determines a Risk Priority Number by way of the multiplication of ordinal numbers - whereas a scalar should be used. Risk priority numbers calculated using failure mode and effects analysis for several risks within an organisation are sometimes added together to evaluate the overall risk for that organisation even though adding risk priority numbers - which are based on ordinal scales - really has no mathematical justification. (see MacKenzie CA (2014) Summarizing Risk using Risk Measures and Risk Indices. Risk Analysis 34(12):2143-2162 and Cox LA (2008) What's Wrong with Risk Matrices? Risk Analysis 28(2):497-512)
Therefore, along with other consultant induced buzzwords such as "risk velocity" and 'risk criticality", I'm not convinced that adding new terms to the risk management lexicon actually benefits or progresses the discipline and science of project risk management.
Thanks for sharing. It was a really nice blog to read
Thank for sharing, clear and simple.
Carlos Rúa Machado
MBA, PMP| Professor at National University of Colombia
Medellin, Antioquia, Colombia
Very interesting, thank you.
Bold Query. A career of a project manager could hinge on these two things, risk priority vs risk urgency.... a double edged sword.
Deepesh Rammoorthy
ICT Project Manager ( PMP®AgilePM®Certified ScrumMaster® (CSM®))| Australian Red Cross Blood Service
Tarneit, Vic, Australia
When considering Risks in the Project , ask yourself this question :- "Does this risk have the potential to affect Time , cost, scope, quality , risk , business case on my project? ". If the answer is yes to any of these, the Priority is likely to be a lot higher than some of the other identified risks.
How urgently do you need to mitigate this risk , without adversely affecting the aforementioned dimensions ? That will determine the urgency
Your power outage example may require urgent fixing and priority attention because your business operation will be adversely affected...it will at the very least affect the running Cost of your manufacturing plant and Quality of the product delivered out of the door.. not to mention the time taken for your operations to come back to normal.
Thanks for sharing. Very nice blog. I like the way to think about the "time axis"...cause as a project manager, by this way, the practical "progressive elaboration" can be adopted... Also thanks for the up-loaded suggestions as open minded learning!
Govinda GUNJA
Engg. Project Manager| Unisys India
Bangalore, Karnataka, India
Nice explanation and mind opening. Till now my approach was priority × impact. I will consider your inputs now onwards. Thanks.
I like deepest consideration for impact scale.
RAMESH PB
Authorised Training Partner - PMI for PMP & PMI-ACP| education
Chennai, Tamil Nadu, India
P&i in Y axis, Urgency on X axis. Plot risks and draw one Cross on the coordinates ! You have High Impact, High Urgency on the top right quadrant, High Impact Low urgency on
top left, High Urgent Low Impact on bottom right and Low Impact Low urgency at bottom left quadrant. But can someone say if Criticality is the same as Urgency. If not, where does "critical" find place in qualitative risk assessment ?
Yasir Abdulrahman
IT CRM Project Manager| Columbia Forest Products, Inc
Knoxville, Tn, United States
Well explained…. Thanks Marian.
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