Risk Management Effectiveness is the percentage of loss events that were managed as risks before they occurred. It is a basic metric that measures the coverage of risk identification and management.Evaluating risk management by total losses doesn't always make sense. A highly profitable business unit may choose to accept a wide variety of risks, resulting in regular loss events. As such, loss events aren't necessarily a sign that risk management is suboptimal.
The goal of risk management is often to identify risks and ensure they are treated. When this is the goal, Risk Management Effectiveness is a good measure of your risk management program or activities.
|Definition||The percentage of loss events that were managed as risks before they occurred.|
|Value||Indicates that risks are being managed. In other words, losses that occur were accepted as risks by business units or were unavoidable residual risks.|
|Example||A project has 80 issues and problems over the course of its delivery. Of these, 60 were identified as risks by project risk management but were accepted by the business in order to expedite the schedule and reduce costs. The risk management effectiveness rate for the project is:(60/80) * 100 = 75%|
|Related Concepts||Risk TreatmentResidual RiskRisk Acceptance|
This is the complete list of articles we have written about risks.
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A list of common business risks.
The four things that can be done about risk.
The potential that you'll achieve too much of a good thing.
Any risk that people have a strong aversion too.
The definition of risk taking with examples.
A list of risk examples by type.
The two main factors in modeling a risk.
A definition of calculated risk with an example.
How to calculate relative risk with examples.
A guide to project risk.
A list of basic project management techniques.
A definition of workaround with examples.
A list of project branding techniques.
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A definition of action plan with examples.
The primary types of cost overrun.
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A guide to project oversight.
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