The importance of risk management

The importance of risk management

The Importance of Project Risk Management

1

Why is Project Risk Management Important?

Project Risk Management is often overlooked or underplayed . When this is done, unfortunately this can result in a project not being successful or  not being able to catch the issue in time to put in mitigation actions.  


My experience throughout the years in a variety of projects as a Partner with PricewaterhouseCoopers, Management Consulting Services and as tthe founder of several boutique consultancies has shown that if risk management is proactively planned and implemented, it can genuinely prevent projects from "going off track" and can handle ensuring that the project can pivot and mitigate the risks.


This has been true for projects I have been responsible for  in the US, Australia, Japan, Australia and other countries. I have had the honour of working in these various countries for considerable amounts of time, and unfortunately have seen too many projects "go south" -- and require my project recover services.  This often involves "project autopsies". 


For example, with  a project for a major global company with a major branch in Japan, the risks  were considerable because it involved the complexity of merging of two companies, the use of "foreign" teams (which were not always accepted in Japan!), the redefining of processes (many which had been manual), and the considerable people change that was required for the substantial new processes, new roles and accountabilities and new systems of the merged companies.

If there had been minimal attention to proactively understand and manage the risks, this project could have resulted in hundreds of million dollars overruns, poor quality and compromised schedule.  I was concerned about the ambitiousness of the project/program, but fortunately high-quality talented resources were brought in and were obtained within the Japanese branch company -- which helped mitigate some of the risks.


In another client case study, a previous failed attempt at an ambitious project that provided a marketplace of services for International Students coming to Australia to study had neglected various risks including the consistent communication with senior stakeholders as to the importance of the project and "what was in it for them".  The previous attempt at the project also didn't pay attention to ensuring that the technical team had sufficient resources and understandings to do their job, i.e. they neglected considerations and design of the larger "enterprise architecture" which resulted in an isolated and non-supported project that didn't fit into the overall technical infrastructure.


For more details on these case studies and other organisation learnings relevant to your organisation, please feel free to contact me and set up a free strategy call via the following link: https://kenbusinessdoctor.youcanbook.me/ 

2

What is Project Risk Management?

According to the Project Management Insitute (PM) -- the premier project management certification organisation --  they define indiividual risk as "an uncertain event or condition that, if it occurs, has a positve or negative  effect on one or more project objectives", whereas overall project risk is defined as "the effect of uncertainty on the project  as a whole .. more than the sum of individual risks within a project, since it inclues all sources of project uncertainty.. represents the exposure of stakeholders to the impolications of variations in project outcome, both positive and negative."  Quite a mouthful!


They further explain that there are "two levels of interest, typified by the scope of responsibility and authority of the project management and the project sponsor.  The project manager is accountable for the delivery of proejct objectives,", and typically record the project risks in a risk register.


The project sponsor on the other hand is "interested in risk at a different level... How risky is my project?" This is a difficult question to ask honestly, and I have had to coach project sponsor in finding the courage and honesty to ask this.


For the project in Japan, the Project Risk Management  included both the "big picture" of the external factors impacting the project (sometimes viewed within the framework of PESTLE, i.e. Political, Economic, Social, Technological, Legal, and Environment framework, and the within - project factors that were affecting the project.


Without project risk management, there can occur a negative domino effect which can derail the project -- resulting in more cost, delayed schedule, poor quality and unhappy customers! 

3

How does One Implement Project Risk Management

For the project case study in Japan, the risks were explicitly identified, rated as to severity and likelihood of occurrence, and pragmatic mitigation actions identified.  An example of this is shown in the following figure:

Even cultural risks were mitigated, e.g. by the tradition of painting one eye of the Duruma Doll at the beginning of the project and then the other  eye upon completion.

These risks were fortunately not kept in a drawer in file cabinet or or in a seldom-accessed directory (as often done). Instead they were  first documented in a Project Charter which gave the "big picture" of the key stakeholders (and their influence and power", the summary business case and objectives of the project, the key business requirements, the project approach and methodology, the project schedule and major milestones of the project,  (if interested in more information on the broader project management approaches and alternatives, please see my blog:  Interested in Effective Project Management that Delivers Exceptional Projects?


Then the risks were reviewed on a weekly basis -- using very visual "traffic lights" of status of green, yellow or red.  


There were also meetings explcitily dedicated to the analysis of root causes of problems and risk, and were candidly and honestly "brought to light". 


So in summary, project risk management is key to the successful completion of projects and their many moving parts. 


For an understanding of more of these tools and pragmatic approaches to Project Risk Management, feel free to set up a free strategy call via the following link:  https://kenbusinessdoctor.youcanbook.me/   

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