Top Down Techniques for Project Risk Management

Much contemporary project risk management practice is based on the management of a register of discrete risks. This is consistent with numerous standards that, typically, focus on the definition of “a risk” rather than overall project risk exposure. It is possible to implement practice of this nature in a purely bottom-up fashion. Whilst bottom-up risk management techniques may increase the value added by project control, failure to combine them with a top-down perspective can result in a number of adverse consequences including narrowing the focus for risk identification, production of irrational quantitative risk models and failure to engage senior management. Furthermore, top-down techniques are at their most useful in the earlier phases of a project; the period during which the benefits of risk management are usually at their greatest. Learned experience from previous projects is also often easier to apply from a strategic perspective. This paper therefore seeks to redress the imbalance in much of today’s common practice. It explores the concept of overall project risk (PRAM Guide 2004) and then reviews a number of proven techniques that may foster a topdown approach to risk management, including: • Multi-pass analysis, starting with a minimalist first pass. (Chapman & Ward). • The use of strategic risks both as a resource for further risk identification and a structure that can contribute towards management accountability and reporting. • Structuring schedule and cost risk analysis models from a top-down perspective. • Evidence-based top-down risk models compiled using data from previous projects. • Risk Breakdown Structures (Hillson).