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Ensuring Success With Project Risk Management: An Overview

Updated on July 31, 2012

Project Risk Management Ensures Project Success

More than half of all projects - even well-planned ones - fail to deliver desired results on time and within budget. Creating and using a Project Risk Plan can change those odds - in a big way.

Risk Management Ensures Success

Even the simplest project benefits from a bit of risk management. George Santayana, the great 20th century philosopher, said "Those who cannot remember the past are condemned to repeat it." Project Risk Management is remembering what went wrong on past projects, and making sure not to let those things happen this time. So, to put it into the positive: Those project managers who think about what might go wrong are more likely to manage the project's journey to success.

Risks are everywhere!

Project Risk Management for Taking a Walk: Know there might be banana peels. Don't step on them!
Project Risk Management for Taking a Walk: Know there might be banana peels. Don't step on them! | Source

Positive Thinking - or Denial?

The strangest justification for not doing good risk assessment is "if we think about what might go wrong, it's more likely to happen."

Now, I want to be clear. I know our minds are very powerful. I use affirmations. I find that dwelling on failure and difficulty leads to failure and difficulty. And I've seen project teams that focus only on what could go wrong, and sure enough, nothing goes right.

Folks who avoid conscious planning in relation to what could go wrong miss the entire point of The Power of Positive Thinking. And The Power of Positive Thinking, itself, has been found to be limited, harmful, and destructive.

So, what type of thinking creates success? Realistic optimism. We're real about where we are. We're optimistic about where we want to go. We focus our optimism through affirmations and visualizations. And we pay realistic attention to what might get in the way. Or, in project management terms: We define our current situation; We do scope definition to create a clear goal; and we do risk management to make sure we get there.

Because of this, I like to call my risk identification brainstorming sessions proactive worry.

Five Dumb Reasons Not to Do Project Risk Management

I've trained over 4,000 project managers, and I've heard every excuse for not planning a project well, or not including a risk management plan with our work:

  • My boss says we don't have time to plan, we just have to get to work.
  • We've made a quick plan and we just have to get going.
  • If we think about what might go wrong, it's sure to happen.
  • We thought about what might go wrong. Isn't that good enough?
  • No one can predict the future. Trying to guess what will go wrong is a waste of time.

Practical experience shows that these are all recipes for disaster. Instead, taking a little time for risk planning and risk management - as little as an hour a week - can ensure we deliver our projects on time and within budget, and come out smelling sweet, even when the crap hits the fan!

What is Project Risk Management?

A project is a dream with a deadline, or a problem scheduled for solution. In launching a project, we commit to delivering a certain result, such as a new product or service, by a certain date. A risk is anything that could change our plan, especially anything that could cause us to deliver late, run over budget, or deliver results that do not satisfy the customer. To put it simply, project risk management is figuring out what could go wrong, and making sure it goes right!

Project Risk Management is, quite simply, our natural human intelligence, applied to these questions:

  • What can go wrong on this project?
  • How can we keep those things from going wrong?
  • If those things do go wrong, what will we do about it?

A little time spent during planning to answer these questions pays off big. An hour a week during the project asking, "Did anything go wrong?" and "Is anything about to go wrong?" and taking care of whatever we see makes a huge difference. When we are prepared, and we catch problems early, we can fix small problems before they create schedule delays and cost overruns.

Where Does Project Risk Management Fit In?

If you don't have a project plan, then that's a big risk. So, write a good initial project plan, defining scope, time, and cost. As soon as scope is defined, it is possible to start project risk planning. A complete project plan includes scope, time, cost, risk, and four other areas, to include all nine areas of project management knowledge. Once the project plan is approved and the project launches, then the job is to manage the risks. Check for risk events each week of the project, and each day during critical phases, such as installation. And, if a risk event occurs, manage the event and the project back to success.

The Steps of Simple Project Risk Management

Most projects do not need a great deal of sophisticated risk management. It is enough just to identify the most significant risks, and take come action to either reduce their likelihood, or to prepare for them in case they do happen. That said, these are the essential steps of Project Risk Management throughout a project:

  • Risk Identification is the first step in risk planning. Quite simply, we make a list of what might go wrong. This is called a risk list, and each item on it is a risk event.
  • Risk Analysis is where we look at each risk event, and assess how likely it is to happen, and how much damage it would do if it did happen. With this information, we can create a prioritized risk list. Simple risk analysis is qualitative, that is, based on generally available information, opinions, and assessments.
  • Risk Response Planning involves accepting that each risk might happen, then taking action to prevent or prepare for the risk, in case it should happen.

The 3 items above are all done at the beginning of the project, as part of planning. When the plan is approved, we get to work. That is called beginning execution. With execution, we need monitoring and control, the management that makes sure we stay on course. This adds:

  • Risk Monitoring and Control. Risk monitoring is time taken each week to keep an eye out for risk events that might happen soon, or that have started to happen. Risk control means assigning someone on the project to handle the risk event when it happens, and taking whatever action is needed to manage the risk event and bring the project back on course.

Most projects will succeed with a bit of attention to risk planning and management using the above steps. In some cases, for larger, more unique, or riskier projects, advanced risk management techniques are useful.

Elements of Advanced Project Risk Management

Some projects benefit from advanced project risk management techniques. Each of these techniques is a method in itself, and should be considered separately from the others.

Feasibility Planning

Classic Project Risk Management from the PMI assumes that the project will move forward. But, when the project has a significant chance of failure, the possibility of failure should be addressed early, before the project is approved. We consider risk issues early by performing a feasibility study, where we look at risk, and incorporate the results of our research into an assessment of whether the project should be approved, or whether it is too risky, and should not be launched at all.

Risk Management Planning

If we set up a simple risk management system and use it for the length of the project, that will be sufficient for most projects. But we don't want to look back after a project failure and say, "I wish we'd done more risk planning and risk management!" So, in some cases, we want to take more time to think about how we will manage risk on a project. This is called Risk Management Planning. It is important to do when:

  • We want to set up a standard risk management system for all of our projects.
  • We are taking on a project that is larger, more complicated, or very different than everything we've done before.
  • Our project is operating in a risky area of endeavor, such as during military action; in an area threatened by political instability, terrorism, or natural disaster; or in an inherently risky business, such as demolition.
  • The stakes of success for the project are high, such as when staying in business depends on project success.

Quantitative Risk Analysis

As defined by the PMI, Quantitative Risk Analysis means risk analysis using advanced statistical techniques. The simpler, qualitative risk analysis can include numerical risk factors with ratios and equations. Quantitative Risk Analysis is reserved for very large projects with thousands of tasks and hundreds of past, similar projects. When a company has historical information from hundreds of past projects, statistical analysis of past data can yield new information about the likelihood and cost of each risk event for the new project, guiding our risk assessment.

Start With the Basics

There is no practical reason to focus time or energy on learning feasibility studies, advanced risk management planning, or quantitative risk analysis before you have basic, solid risk management techniques in place for each project, from beginning to end. The PMI advises that we know about all the available processes, but we only use the ones that suit our current work. And, as my friend athletic and life coach Dan Millman likes to say, "a little bit of something is better than a lot of nothing."

The Point of Project Risk Management: Project Success

According to the PMI, fewer than 45% of all projects are delivered with results that meet requirements on time and within budget. And that refers to the ones that are well-defined, planned, and managed.

We want a better batting average than that! Learning and using the basic techniques of Project Risk Management, and adding advanced techniques when appropriate, can put our own project success rate much higher than average. That's good for our projects, our jobs, our reputation, our companies, and our career.

Your Next Step

What's Your Next Step in Project Risk Management?

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Take Your Next Step Now

If you're ready to take the next step in Project Risk Management, let's begin at the beginning, with Project Risk Identification. Discovering project risks is more fun than you might think. It includes Proactive Worry, Identifying Positive Risks (things that could unexpectedly go right), and a pizza party!

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    • SidKemp profile imageAUTHOR

      Sid Kemp 

      6 years ago from Boca Raton, Florida (near Miami and Palm Beach)

      Yes, Lupine! Oddly enough, risk management is businessspeak for learning from our mistakes.

    • lupine profile image

      lupine 

      6 years ago from Southern California (USA)

      I agree, why dwell on what could go wrong...let's think about what could go right instead. Negative thoughts bring negative outcomes...positive thoughts - positive outcomes. There are no mistakes in life as long as we learn from them and move a little forward.

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