Introduction
Project managers accomplish two things – produce results and control risk. Risk is the unknown, the uncertain, the undefined – present in all projects. Risk is variation from plan – both negative and positive. Risk is the reason for project management. Project managers exist to make project delivery predictable and creditable. Project management furnishes the means for an organization to reduce risk, or variation, of its projects not being delivered as required, or as promised. Risk management has only improved during the past decade. It still is more intuitive than rigorous. Probability tools are decades old. Some use PERT, developed in the 50's, as a brand new way to assess variation in schedules. Much opportunity exits within ‘identifying risk’ to improve risk management. This opportunity takes two forms: first, to take structured looks at all aspects of a project searching for undefined, uncertain metrics; second is to go behind the found risk at the cause of that risk.
Identifying risk becomes the first step to controlling risk. Essential to all other steps of risk management is identifying clearly, where potential variation – risk – exists. Learn structured approaches to find variation and identify risk. First, use project fundamentals of Results, Scope, Performance; then look to the Project Process; Project Work Methods; examine Resources; finally consider Team Work. Each is a part of the project system. Use the Project System (Exhibit 1) as a reminder to look for other possible risks in customers, markets, project leadership, and in management of the project.
Exhibit 1 ProjectMAGIC® System
As we investigate the project process for risk, we look for the causes and the sources of risk. Just what cause or source leads to variation? To respond to risk, to identify risk completely, we must look for causes of risk. You may have to ask Why several times – Five ‘whys’1 – otherwise you are dealing with symptoms not sources or causes of risk. Understand that sources or causes of risk found in the Project Process may lie in the management process – Planning, Executing, and Controlling; or for Resources in Quantity, Quality, Value and Productivity. Find the cause to reduce variation, to make project delivery more predictable, more creditable.
Use a rigorous approach to go through a project's nooks and crannies hunting items missed, undefined, or ignored. Learn a structured methodology to identify risk – just where and what can vary significantly from the plan – for better and for worse.
Learning Objectives
- Learn to better identify risk using a structured approach examining all aspects of the project system.
- Identify possible variation in Results, Scope, and Performance.
- See what risk is generated by Resources (Supervision, People, Tools & Equipment, Materials, Information, Money, and Time).
- Learn to see the cause of Resource risk in Quality, Quantity, Price, or Productivity.
- Find Risk by examining Controls (Reliability, Relationships, Learning, Time, Effort, Cost, and Quality).
- Define Risk within the Project Process (Concept, Results and Criteria, Scope, Planning, Estimating, Scheduling, Procuring, Executing, Evaluating, and Closing).
- Understand that the true risk may lurk in the Management Process of each step in the Project Process (Planning, Executing, and Controlling).
- Look at Work Methods (Team, Tools, Equipment, and Materials) for sources of variation.
- Reflect on the Team Processes being sources of variation.
- Evaluate Markets, Customers, Project Leadership, and Project Management as sources of risk.
Risk Management
Risk Management found in the Guide to the Project Management Body of Knowledge (PMBOK® Guide) has the following steps (PMI, 2002, p. 127):
- Risk Identification.
- Risk Assessment.
- Risk Response.
- Risk Control.
Risk Identification is the least rigorous of the steps. A fantasy exists in project management that skilled project managers can look at a project and know what will vary – with heavy emphasis on negative variation. Tremendous opportunities exist to improve identifying possible variation – both positive and negative – Threats and Opportunities. Total Quality Management asks ‘Why?’ several times to get to the cause or source of the Risk. Risk causes are treated simplistically as ‘Triggers’ – a preceding indicator that or something provoking or indicating that Risk or variation is happening. The PMBOK® Guide defines Triggers as symptoms or indicators not causes. (PMI, 2000, p. 209) Detecting and recognizing change are competency criteria for people, teams, and organizations. Systematic identification of Risk will enhance understanding of causes of risk. It will increase the sensitivity to the indicators or ‘Triggers’. Most importantly, understanding the cause or actual source of risk will greatly enhance responding to risk.
We find Risk Management wrapped with negative Risk or Threats that Project Managers fail to Exploit Opportunities. When they conduct rigorous, structured Risk Identification with an eye to Causes, they will flush out Opportunities as the positive side of responding to the Cause.1
Identify Project Risk
Good project management increases the predictability of the outcome and reduces the variation within Result, Scope, and Performance. Let us explore what we do and can do to increase the predictability of project delivery. Start with the project in general and ask these eight questions.
- What can vary positively or negatively more than 5% from what is expected?
- What surprises have we encountered in the past on this type of project?
- What can go wrong?
- What else can this cause to go wrong?
- What can go extremely well?
- What else can then go extremely well?
- What do we not know?
- What do we not know we do not know?
These eight questions flush out potential variation, Risk. These questions generate possibilities that allow us to ask further: Is there variation? Is it positive or negative? What would cause that variation? We then can pursue that variation to its source or its cause.
Risk Indicators and Triggers – Controls
Just as looking for variation within the project, we can examine Controls for potential variation. Controls do not cause variation, they only report variation. When work of the project is ongoing, Controls are typical indicators or triggers that tell us variation is occurring. Look at the Controls before execution with a structured approach. We can identify possible variation in the controls. These are not sources of Risk, we have look deeper to find what causes the variation. Controls are:
- Effort – Labor Hours
- Duration
- Cost
- Quality
- Reliability
- Relationships
- Learning
How might a specific Control vary? What might cause that variation? When might that variation occur? How will that variation show in this project dashboard? How else will that variation manifest itself?
Identify Strategic Risk – Results, Scope, Performance
We consider Results, Scope, and Performance to be fundamentals of Project Management. (Exhibit 2) Risk or variation of these fundamentals will be a function of planning, experience, and management skill. Questions such as these will generate specific questions for Result, Scope, and Performance:
Results: Who is the customer? What does the customer want? Are the results well defined? What are clear measures of success? What measures are FUD (fear, uncertainty, and death)? What is the Threat in these issues? Is there Opportunity to improve the Result?
Scope: Is there a well-defined list of deliverables that will produce the Result? How is quality assured for each deliverable? When can the customer touch, taste, smell the Result before delivery? Will the customer stay within the Scope? How will it creep? How will the Scope evolve as the project progresses? What is the Threat in the Scope on this project? What is the Opportunity found in this Scope?
Performance: Is there a plan for each work item, schedule for all the work, estimate of labor hours, and budget for costs? How is Performance measured? How much variation triggers alarms? More than one metric is necessary: Actual versus plan earned, actual versus scheduled, remaining, required to finish.
Exhibit 2 ProjectMAGIC® Fundamentals
Identify Management Risk – Project Delivery Process
For variation in Result and Scope, look at the Project Process for causes of variation:
- Create the Concept
- Define the Results and Criteria
- Establish the Scope
- Plan Requirements
- Estimate Effort
- Schedule Performance
- Procure Resources
- Execute Activities
- Evaluate Results
- Close & Celebrate
What can go wrong in each phase? What can go right? Is the estimate correct? Is the estimate complete? What kinds of opportunities are in the budget? What about the Schedule? What is the quality of the workers? What information did you not have? What is the Threat in Performance? What is the Opportunity in Performance?
Causes of Management Risk
If there is a cause or source of variation or other variation identified by looking at the project delivery process, look to the management process to find causes.
- Planning
- Execution
- Controlling
Identify Resource Risk
Many times the source of Risk in Results, Scope, and Performance – particularly Performance – lie in Resources:
- Supervision
- People
- Tools
- Equipment
- Materials
- Information
- Money
- Time
What is the Risk – Threat or Opportunity – identified in Performance? Which Resource could be causing this Risk? What is the Threat in this Resource? What is the Opportunity? What will set the variation off? How will you detect that Risk (Threat or Opportunity) happening? What is the trigger? What can you do about this possible variation? What else will this Threat or Opportunity cause to happen in addition to the impact on Performance?
Causes of Resource Risk
To deal with Risk in Resource, you have to go one-step deeper to determine the cause and then an appropriate response. What is the cause of the variation in that Resource? We look to Variables to identify causes of Resource Risk:
- Quantity – too few or too many will impact productivity and product quality. Is there an Opportunity?
- Quality – poor resources impacts product quality and productivity. Is there an Opportunity?
- Value – cost or price variation can result in fewer resources, poorer quality, and sometimes-lower productivity. Is there an Opportunity?
- Productivity – poorly supervised, poorly planned work can reduce productivity of resources. Waste reduces productivity of materials, tools, and equipment. Is there an Opportunity?
What is the source of the variation of performance that is found in resources, what is the cause of that variation found in resources? Again, you may now have to look back at the project process to determine why the procurement is acquiring poor resources.
Causes of Performance/Resource Risk in Productivity
Three variables of productivity influence variation:
- Efficiency – doing things right, the right way, by the right method.
- Effectiveness – doing the right things – selection of what is to be done – the scope of the task.
- Efficacy – doing the right things, the right way, at the right time – scheduling the best time to do the task.
You may find the source variation in Productivity in any one of these productivity variables. Method selection is crucial – have to do things right – that is not to say new and improved is the best way. Remember a pencil is great for writing in space; we do not always need a pressurized pen. Are these the best methods for this place and time? Scope of providing the deliverable is also important. Scope keeps reappearing at each level. Just what are the tasks required to produce this deliverable? Are these sufficient? Are there extraneous steps? Finally, when is the best time to do this task? When can it be done? What is the range for doing this task? How quickly can we do it? Can we spread it out? How can that help us? Sometimes the best time and best way to do a task is neither the fastest nor the quickest. How many people can work on this task? How few? What is the difference in duration? What is the difference in quality? What ever produces the highest quality may be the quickest.
Causes of Performance Risk in Work Methods
Work methods may be the source or cause of variation within performance. How work is accomplished – the method – ties together Resources:
- People / Crew / Team
- Materials
- Tools
- Equipment
- Information
- Supervision
Methods require a selected Quantity, Quality of these Resources to produce a level of Productivity. Change any resource and that productivity changes. Change the Work Method and the Resources required changes. Productivity produces the Duration. Teams or crews for a work method dramatically influence Productivity – more on that later. Has the work method been used before? What is the people's experience with the method? Where and how will the materials arrive? How will the people obtain the tools and equipment required to perform the work using this method? What other methods are available if we change one of the resources? What changes in people are possible? Tools? Equipment? Materials? Tremendous changes in productivity can be accomplished by changing the materials? Where can we add value to the Materials to increase Productivity? To reduce cost? To reduce Effort? To reduce Time?
Find the Causes of Risk to Determine the Response
The thorough analysis of the components of the project system will help us find more Threats but it will also uncover more Opportunities. It forces us to look at how we do projects not just at the work of the project. Deming says 85% of all quality problems are found in management – that is us (Deming, 1991). We do not look at management as a source of Risk partly because it is tough to look at ourselves. Project management or lack thereof is a tremendous source of risk. If we know what the cause of the Risk, we can either respond to the Threat or Exploit the Opportunity. There are abundant Opportunities. The key is dealing with what ever is causing the Risk.
Know the Causes of Risk to be Vigilant during Execution
If we look for the causes of risk, we will become much more familiar with variation and with ‘triggers’ or indicators of Risk. Our sensitivity to variation will increase. We can smell, taste, and touch variation before it occurs. I have been hired as a prophet on projects to determine when costs vary before they happen. Project Masters and organizations that have mastered management detect variation quickly, recognize the impact, and act to resolve the change. We created a problem resolution team and gave them this charter – to find and resolve problems before they blossom. Study the causes of Risk to respond with effective, efficient and powerful solutions. Study the causes of Risk to detect and recognize Risk during project execution.