How to Manage Risk Smarter and Avoid Overkill

Managing risk within a project is a good idea, that’s agreed upon. Risk Management is essential and contributes significantly to the successful delivery of projects and programmes. Where it can and does go wrong is when there is an over-reliance on the risk factors of the project. When these factors start driving the way the project moves forward, problems arise.  Risk management is crucial, but it’s not the be all and end all of the project. However, that’s what often occurs in overly risk-averse organizational cultures.

To help understand how risk within projects can be better managed it is worth considering a number of aspects of the risk identification and mitigation processes involved.

Use appropriate monitoring and mitigation

For large, complex programs covering numerous disciplines, (like lengthy construction, software, and telecommunications projects) it is appropriate to have a risk set-up that matches that complexity.  The set-up needs to identify risks in the disparate areas of the program and allow judgments to be made across the program as a whole.  A Risk Manager (and team members) might gather the requisite management information, for example.  Difficulties arise, however, when the scale of the project is reduced but the risk processes of large complex programs are applied.  When this happens, the risk process starts to drive the program and stops providing a benefit.

Record risk only once in multiple related projects

Far too often the same risks are identified across multiple related projects or within a program of projects.  Even with sophisticated risk software, the potential for confusion is great with different scores being applied to probabilities and impacts.  Make sure you identify the one true risk and record and track it within the correct project.  If other projects or a higher level program need to be aware of it, that is fine. Make them aware of it, but make sure you don’t start double or triple scoring the same risk.

The more risks you identify the longer the project

It’s strange but true.  The more risks you identify and manage within a project the greater the chance the project might not come in on time.  The reason for this?  Well, think about it. It’s very easy to identify lots of risks for any project, but it’s how far you go that really matters.  Get right down ‘in the weeds’ and you will still have to identify risk owners and people to investigate mitigation strategies, etc.  All this takes valuable time and effort away from the main job of project delivery.  So, make sure you have the important risks identified and managed, and keep reviewing them to ensure your list is up to date.

Accept the risk as is

Once you have identified your set of appropriate risks for your project you need to decide what to do about each and every one of them.  Putting in place some form of mitigation may be necessary. This will add cost to the budget, but that’s just the way it is.  Having said this, there could be risks that you decide to accept because the probability of them occurring is so low and/or the cost of putting in place some mitigation is high.  You aren’t ignoring the risk. You are making a conscious decision to accept that it may happen.

Recognise that opportunities arise

Risks happen in any project, and some may have been predicted and planned for while others may not have been.  The project is the project with its set requirements. That’s what everyone accepts as the truth.  But what if a risk occurs which starts to make you think seriously about the validity of the project or the direction in which it’s going?  When reviewing the project risks and looking at those that have occurred, ask yourself the question “Does this project still need to go in this direction or should we consider altering it?”  Of course, the ultimate choice might mean cancelling the project altogether, which is never an easy decision.

So, are all risks bad?

Of course not.  If you make sure you are managing the risks that are appropriate to the project, and you make related programs and projects aware of those risks, then you’ve covered most of your bases.  Opportunities can be anywhere within a project space, but just remember to think about them as you go through the risks – it makes that risk review meeting far more meaningful.



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6 thoughts on “How to Manage Risk Smarter and Avoid Overkill

  1. Pingback: Mushcado

  2. Hey Paul – I really liked your statement about risk driving the project. I haven’t thought much about that before but I can see how it can. I still believe that risk management up front, from day one, with no fear is the best way to go! I know it takes up time the PM might want to spend to “just get started” but HOW it saves time during the project! Can’t beat that.

    • Laura, Thanks for your kind words. I couldn’t agree more with your statement about starting risk management activities from day one. Far too many people just dive right on in and wonder what’s happened when really obvious risks materialize and bite them later. Paul

  3. It’s also important not to count the financial implication more than once. For example, if the project budget is inceased to mitigate a risk by employing extra resources, then the contingency associated with the risk must be reduced.

    • Rhys,

      Thanks for your comment, you are absolutely right. My view is that a project’s budget must cover whatever risk mitigation is undertaken. In this way it could well be seen as a constraint or limiting factor on what risks can be dealt with but at least it is clear to all concerned. The other aspect of this is when a particular risk is identified and additional budget is provided – in this instance, it should be treated as an addition to the project budget specifically to cover that risk, i.e. ring-fenced and not to be siphoned off to other elements of the project.

      Paul

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