Thinking positive about risk management

Kay Wais, MS, PMP, Owner, Successful Projects, Author, Trainer, and Consultant

Abstract

Risk management is something that many organizations believe to be important but actually fail to implement effectively. Suggestions regarding risk management planning are often associated with negative thinking, resistance to a project or a change and an uncooperative attitude. Implementing a risk management process within an organization or for a specific project is often considered to be too costly and risks are therefore ignored until something unfortunate happens. When a risk event occurs the reaction is, in many cases, a series of heroic acts to get the project or the organization back on track. This risk reaction is generally far more costly than an organized and proactive risk strategy and many of the lessons learned during the recovery process are not documented due to the fast pace at which the risk containment team operates. “Thinking Positive About Risk Management” is about managing risk before major events occur. It prepares teams, as well as organizational leaders, with tools and techniques that will ensure readiness to deal with a wide range of potential project and organizational “show stoppers.” The goal of positive thinking about risk is to condition project teams and team leaders to be much more “contingency prepped” by focusing on the opportunity side of risk as well as the potential threats. Creating an environment where risk is anticipated, possible consequences are considered, opportunities are identified, and active response planning is encouraged, significantly increases the probability of a successful outcomes.

Goals of a Risk Management Strategy

Risk management is a fundamental part of organizational strategic planning and a key element in project planning. Basically, project planning has many similarities to the processes associated with developing a strategic plan. The generally accepted goals of a risk management process include:

 

1) Creating the perception that risk management is a positive and productive part of project planning

2) Providing risk identification processes that lead to real action

3) Ensuring that teams are constantly and proactively identifying and responding to potential risk events that may result in serious consequence as well as opportunities that can lead to cost savings, greater productivity, and new business opportunity

4) Shifting team culture to view risk identification as “Good News”

5) Reinforcing proven risk management methods

6) Introducing creative and effective risk management processes

Common Sources of Project Failure

Project failure is a popular topic in many project management blogs, papers, and presentations. It seems that project managers spend a significant amount of energy reviewing failures, looking for answers to the question “How did that happen?” and “What are we going to do now?” It is important to discuss failures as part of the future prevention process but it is more important to discuss how to prevent failure that may be caused by poor planning, non-verified assumptions, and a tendency to just “wait and see.” Project failures, major risk events, and serious issues are often a result of moving too fast. Today's highly competitive business does require accelerated planning. Yet, it is important to do some “what-if” thinking before simply committing organizational resources. Some of the more common sources or reasons for project failure include:

1) Organizational factors – structure, decision process, approvals

2) Unachievable objectives

3) Inability to identify user needs (requirements)

4) Inability to express requirements adequately

5) Ineffective communications

6) Poor planning and control – a rush to execution without a risk strategy and a lack of defined change control processes

7) Corporate goals are not understood – no clear connection to the organization's vision and mission

8) Attempting to shorten intervals

9) Plans were based on insufficient data – The “hit-the-ground-running” mindset

10)No one knows the ultimate objective – a clearly defined scope has not been prepared

11)Inadequate or poor project estimating – use of averages and “gut-level” instincts

These are only a few of the items that surface during discussions about project failure. In the book “How to Save a Failing Project – Chaos to Control,” Ralph R. Young, Steven Brady, and Dennis C. Nagle Jr., emphasized the value of project planning before acting, updating the plan continuously during execution, always looking for signs that the project is deviating from the plan, developing project health measures, preparing the team to develop steps to get a project back on track (through the all-important “what-if” questions), and documenting lessons learned that will prevent future projects from getting into trouble. Considering these recommendations, “Thinking Positive About Risk Management” is both an attitude and a process. The goal is to create a team that is highly sensitized to risk and practices an approach that is characterized by the Louis Pastuer quote, “Chance favors the prepared mind.” It's not about luck. It's about being ready for whatever may be waiting around the next turn, whether it's an opportunity or a new threat.

Successful Project Planning

Today's project and program management environment is focused on execution. The nature of the world economy, the intense competition experienced in most industries, and the rapid changes in technology are factors that fuel the need to execute quickly but some well thought-out planning is essential before a launch. Asking the right questions at project start-up will provide a solid foundation for success and create a platform to introduce risk management as an essential process that will be observed and accepted by all key stakeholders as the project is initiated.

The following questions will form the basis of a strong] scope statement and will provide the team with the information required to begin the detailed planning process. These questions not only form the scope statement but they also require the project team and key stakeholders to focus attention on the details and the potential risks.

 

1.  What must be done?

2.  Who requested it?

3.  Why is it needed?

4.  How should it be done?

5.  Who should do it?

6.  When must it be done?

7.  How much will it cost?

8.  How good should it be?

9.  Who are the customers? (Who will use it?)

10.What performance is required? Why?

11.What strengths do we have?

12.What weaknesses do we have?

13.What opportunities does the project present?

14.What risks/threats exist?

15.How does the project impact our business?

Risk Planning – A Positive Approach

“The problem with the future is that more things might happen than will happen.” Plato

The quote attributed to Plato provides us with a key challenge about risk management. This is the perception that spending a lot of time and effort performing risk management activities is pointless because most of the time the fears and negative projections don't occur. Experienced project managers know that a failure to address risk upfront will result in many new “experiences.”

What gets us in trouble is not what we don't know. It's what we know for sure that just ain't so.” Mark Twain

The Mark Twain quote provides us with another perspective. Project managers will have to deal with people who think they can predict the future and are certain about which events will occur and not occur.

It is important to emphasize that risk is a measure of uncertainty and that all of the facts we have today and all of the lessons learned we have experienced do not provide a guarantee about anything. A very effective approach is to simply think about risk, plan for it, and be ready for new risks. That is what is known as positive thinking about risk management.

Planning for risk can be summarized as follows:

▪  The Business Perspective: A risk management program should have a single overarching goal: Ensure that a company has the cash available to make value enhancing investments – Harvard Business Review

▪  Project Perspective: Project risk management should have a single overarching goal: ensure that threats are minimized and maximum value of project results is achieved.

Note the similarities between managing business risk and managing project risk. The connecting word is “value.” The positive approach to risk management assures greater attention to potential problems and opportunities and encourages project teams to be a little creative when asking the “what-if” questions. Consider this: after developing the project scope and reviewing it in detail with the project team, ask the team to describe how to execute the project flawlessly. What would it take to complete the project with no appreciable problems, issues, or set-backs? The team may not take you seriously at first but be persistent. This little exercise will help the project manager form a very good knowledge base about the capabilities and attitudes of the project team. When they have completed their brainstorming about the flawless project, ask them to create a plan that will produce that result. Again, we are talking about planning and getting people ready for the problems that could arise. However, the approach is highly positive and focuses on what is possible. All of the input from the team is based on past experiences. There is no question that risk management is beneficial. The factors are:

▪  It's part of doing business – Risk management is necessary to maintain a strong position in an environment where “uncertainty” continues to increase.

▪  Planning tends to focus on the past (best practices, lessons learned). This is OK but there is a need to develop new scenarios about what might occur in the future. This is the basis of positive thinking about risk. Condition the project team to create scenarios about possible future events. Encourage imagination.

▪  Risk management allows project teams to address uncertainty explicitly and formally.

▪  With effective risk management as an integral and required part of project management, we cannot only predict possible future outcomes, but we can also take action to shift the odds for project success in our favor.

A Case Study

To demonstrate the importance of planning for risk, a somewhat unusual project was selected. Instead of a building construction project, or large move from one location to another, or an IT infrastructure or software development project, a Rock Concert was the preferred choice. Consider the complications associated with planning and executing a concert in a large outdoor arena that will be attended by more than 50,000 adoring fans. Today, most concerts of this type include huge video productions, powerful audio systems, pyrotechnics, security, transportation of large amounts of specialized equipment, a demanding band of “rock stars” marketing promotions, and many other items that require detailed planning.

A concert is certainly a project and dealing with a production like this will require a considerable invest of time to plan and to prepare for the potential risks. The risk process begins with a detailed scope statement. Most scope statements provide answers to Who? What? When? Where? Why? And How? The “what? question” addresses the deliverables of the project, In this case, what?, in addition to the band's performance, will be included? A concert has several deliverables. Using the WBS to start the process and define the complexity of the project an RBS (Risk Breakdown Structure) is then used to categorize the risk areas. Risks ate then identified and prioritized and assigned to specific individuals. Imagine the risks associated with the pyrotechnic portion of a concert. Consider the security risks when gathering 50,000+ people in an enclosed area.

The flowing is a partial list of activities associated with a rock concert

 

A. Finalize site and building contract

B. Select local promoter

C. Hire production manager

D. Design promotional website

E. Set TV deal

F. Hire director

G. Plan for TV camera placement

H. Target headline entertainers

I. Target support entertainers

J. Target accommodations

K. Set venue capacity

This list clearly demonstrates the need for an upfront and positive focus on risk management. The potential for disaster is considerable and there is no doubt that concert project planners take their jobs seriously.

Risk Management Adds Value

To summarize the value of risk management, consider the following points:

▪  It contributes to project success through proactive planning and strategizing.

▪  It requires the project team to recognize uncertainty and provides a basis for forecasting possible outcomes.

▪  It produces better business results through more informed decision-making.

▪  It positively influences creative thinking and innovation.

▪  It offers better control, saves money and time, reduces waste, and provides greater benefit realization.

▪  It helps with communication to senior management about what is happening with the project and the challenges the project has to overcome.

The Revelation of Risk Management

Addressing risk early in the project life cycle, and then continuing to promote risk management through every phase, will increase maturity of project team members and should result in more consistent and effective processes and best practices generated by a Project Management Office or a Project Management Center of Excellence. A well-educated and prepared project team will be conditioned to plan for risk and to respond to risk situations. They will have an embedded knowledge that:

▪  Something can go wrong!

▪  There may be new opportunities to pursue

▪  Concern about dependencies and other factors should be voiced early

▪  Saying “no” becomes acceptable and constructive

▪  Risk management means less wondering if they “really meant the date”

▪  Some milestones are incorrectly defined or scheduled earlier than feasible

▪  Thinking in advance about risks can help the team “really look good!”

▪  Preventing a serious problem or event would really look good to all key stakeholders

“Thinking Positive About Risk Management” is simply attitude. There is uncertainty with any project and a failure to address that uncertainty usually results in disaster. If a team is encouraged to ask “what-if” questions continuously through the project life cycle and really imagines what could go wrong along with the question “what new opportunities” are waiting, the team will become conditions to be ready for any situation. In the early stages of positive thinking about risk, the scenarios developed by the team will connect with the obvious and previously experienced risk events. That should be expected. As the team becomes more comfortable with the process, the scenarios developed will be more complex and the potential opportunities will emerge as the team is energized by their ability to not only speculate about risk but also prepare for and respond effectively.

Young, B., Brady, S., & Nagle, D. (2009). How to save a failing project – Chaos to control. Vienna, VA: Management Concepts.

PMI. (2012). A guide to the project management body of knowledge (PMBOK® guide) -5th edition. Newtown Square, PA: Project Management Institute.

Harvard Business Press. (2009). Harvard Business Review on managing external risk, Boston, MA: Harvard Business Press.

Pritchard, C. L. (1997). Risk management – Concepts and guidance. Arlington, VA: ESI.

 

Render, B., Heizer, J., & Amer, B. (2009, Feb. 2). At the Hard Rock Cafe, like many organizations, project management, Homework Experts.

 

http://www.brainyquote.com/quotes/authors/l/louis_pasteur.html

http://www.brainyquote.com/quotes/authors/l/mark_twain.html

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

©2013, Frank Saladis
Originally published as a part of 2013 PMI Global Congress Proceedings – New Orleans, Louisiana, USA

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