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The rise of risk management

Adeline Teoh
November 3, 2011

Risk management has long been an aspect of project management, but in recent years has played a greater role in the way project sponsors view the viability of a project.

At the heart of this increase is Australia’s robust safety culture and a vigilant—although not necessarily conservative—risk profile, says John Jones, risk management consultant with RiskTech. “In Australia, risk management is essential for all major companies and is mandatory for publicly listed companies.”

However, he is quick to point out that risk management is not just about managing threats, but finding and following opportunities. “Companies such as Leighton Contractors have successfully used risk management principles to maximise their opportunities, more than trebling in size in recent years.”

World events have also shaped our view of the role of risk management in projects. Given the turmoil in the financial markets over the past three to four years, as well as the scale of recent manmade and natural disasters, it’s no wonder we’re turning to process to help us cope.

“Companies that embraced risk management as an integral part of their company’s culture and structure have been significantly more successful in weathering the financial storms, natural catastrophes and market changes we have seen in recent times,” says Jones.

He believes there’s a place for risk management in all organisations, not just project-led businesses and departments.

“Many well known food chains and retailers now insist that their suppliers have risk management systems in place to strengthen their supply chain reliability,” he says. “As a natural follow on, the same risk management requirements are being placed on project managers to ensure that project objectives are delivered in full and on time.”

Risk is not just governance

One attitude Jones would like to change is the position that risk is just an aspect of governance and compliance, or “simply more red tape which may slow down the project”. He says project managers should see the risk management as “a practical process that can make the project flow easier with much more certainty of success”.

With his background in engineering and a career in risk management spanning back more than 35 years, Jones says he enjoys working with numbers and can subsequently demonstrate the importance of risk management in the cost benefit for all industries.

“Engineering, project management and development companies can benefit enormously by adopting good risk management principles,” he says. “In my university days, we were taught to evaluate projects with a cost benefit analysis. As companies and project managers become more familiar with the principles of risk management, their application will become simpler and be applied more efficiently as the framework is refined and more widely accepted.”

Successful organisations are already the advocates of good risk management, Jones points out: SingTel, which operates telecommunications company Optus in Australia, “was at the forefront of risk management in Australia”.

The market will also demand robust risk management “to satisfy market concerns post-GFC and with the continuing market uncertainty”. Having a business continuity plan is also becoming a more common requirement to enter into a business relationship, joining mandatory ASX corporate governance compliance.

Finance sector leads

Of all the industries seeking risk managers, Jones says the banking and finance sector currently leads the way due to the effect of the GFC, which has been a significant driver.

“The majority of risk management positions advertised today are generally in the banking and finance sector. This is probably a consequence of the GFC and continuing uncertainty facing our global financial markets,” he remarks. “Credit risk remains a major concern to the lending institutions with a considerable increase of governance, risk management and compliance audits the GFC demanded.”

Adeline Teoh
Adeline Teoh is the editor and publisher of She has more than a decade of publishing experience in the fields of business and education, and has specialised in writing about project management since 2007.
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