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Wanderings

Risk appetite – the official definition

irgEarlier this week I attended a grand occasion – the launch of the Infrastructure Risk Group’s report on Managing Cost and Uncertainty in Infrastructure Projects.  This was held at the Institution of Civil Engineers, sponsored by the IRM, and the endorsements were provided by Andrew Wolstenholme, boss of Crossrail, Lord Deighton, the Treasury Commercial Secretary (yes, that’s a ministerial gig) responsible for infrastructure investments, and Amyas Morse, Comptroller General.  So quite a parade of the good and the great and an interesting occasion.  (Though a visitor from Mars I was speaking to afterwards did comment on the capacity of the white, male, middle-aged intelligensia, operating in herds, to swamped itself in pompous platitudes.  He was greatly amused that the real news the report contains – the putting to death of the dreaded optimism bias – passed unmentioned.)

I’ll have more to say on the report itself later.  For the time being I’ll just note for aficionados that the glossary contains two definitions of risk, one for the concept and another for what we – most of us – list.  Writers of standards and manuals please note: this is now officially ‘best practice’!

Deighton was the most interesting speaker.  He reiterated the Government’s commitment to developing  ’economic infrastructure.’  Top of his agenda were Hinkley Point C (the EDF subsidy had been announced the previous day), HS2 and the Thames Tideway Tunnel.  He talked about the changes that were coming in to move to a clearly defined programme, not just a list of projects.  To do this he is focussing on capability, getting better people to drive the programme forward and making better front-end decisions.  Deja entendu?  He also espoused what you might call the white swan theory: most of what goes wrong is the bleeding obvious, what you could describe as high probability.  So what you need are contingency plans and capacity and risk management really works.

What I wanted to finish with was Morse’s shot at defining risk appetite: how much variance you can have on a project without throwing your programme out.  Your appetite for risk is what won’t kill you.  Does that help at all?

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