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Insight - Lean on me.
(From Financial Director)
Byline: Neil Hodge.
Imagine your business operations are like a trail of upright dominoes. Push one and the rest all topple nicely in succession. But if one domino fails to fall, the whole effect is scuppered because one piece of the process did not do its part. For an organisation, such an operational failure could spell disaster.
Dependency modelling is a technique designed to help organisations take a broader view of the risks that threaten their processes and controls by questioning what alternative procedures are in place if part of an operation failed.
The technique works by breaking down any operation, strategy or project to show each step and the factors on which it depends. The output of all this analysis is a tree diagram showing how the dependencies relate to each other, as well as providing a framework for managing risks. Using workshops, management teams throughout the organisation sketch out the chain of processes that their operations depend on to deliver the needs of the business. They then examine the risks that face each part of the delivery chain and proceed to look at possible measures that will ensure the smooth running of the business should anything go wrong. It is for that reason that dependency modelling fits so well with good, enterprise-wide risk management and contingency planning.
According to Paul Williams, head of corporate governance at IT solutions provider PinkRoccade, "one of the main benefits of dependency modelling is that the model is not only able to calculate the probability of simultaneous failures within a system or project, but also show the impact should those failures occur". He points to the power outages in London and the US last year to show the importance of understanding the impact of multiple failures.
West of Scotland Water is one company that understands such risks. It recently prioritised 150 capital investment programmes based on a thorough risk assessment and the benefits derived from each. The company needed to produce a risk-based justification for a reduction in capital expenditure of over GBP700m from a budget of GBP1.5bn. The project had to be completed in eight weeks.
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