Project Management Tips and Techniques - Managing Risk (Part 2 of 2)
Tom Mochal

Each month, Tom Mochal presents a set of project management tips and techniques for handling various aspects of planning and managing a project. Tom has over 23 years of IT experience. He has developed a comprehensive, scalable project management process called TenStep, which can be viewed at www.TenStep.com. 

Risk refers to future conditions or circumstances that exist outside of the control of the project team that will have an adverse impact on the project if they occur. In other words, whereas an issue is a current problem that must be dealt with, a risk is a potential future problem that has not yet occurred. 

Successful projects try to resolve potential problems before they occur. A reactive Project Manager tries to resolve issues when they occur. A proactive Project Manager tries to resolve potential problems before they occur. Not all issues can be seen ahead of time, and some potential problem that seem unlikely to occur, may in fact occur. However, many problems can be seen ahead of time. They should be resolved through a proactive risk management process.

Here are some additional techniques for managing risk on a project.

• There is a cause for every risk, and an effect if the risk occurs. When the project risks are identified, make sure that the risk itself is noted, and not the cause or effect of the risk. The cause is a situation that exists that sets up a potential risk. In general, the cause is a fact or a certainty for the project. On the other hand, the effect is the likely outcome if the risk occurs. Look at the following example. 

  A solution needs to be implemented in all of a company's worldwide locations, including those in developing countries. If the telecommunications lines are not upgraded on time where necessary, the solution will not be viable in those locations. In this example, what is the risk? 
   

  • Is it that we have to implement the solution in developing countries? No, that is the cause.
     
  • Is the risk that the solution will not be used in certain countries? No, that is the potential effect of what might occur in this scenario.
     
  • Is the risk that the necessary telecommunications upgrades are not performed on time? Yes, this is where the uncertainty lies.
      
• Sometimes it is not easy to look at a project and know whether or not there are risks. However, there are some project characteristics that are inherently more risky than others. For instance, a project with 20 team members is more risky that a project with five team members. There is increased risk with increased communication, increased collaboration, increased information sharing and increased people management. These general risk factors can be summarized in a standard template that all projects in the organization can use as the stating point for their initial risk analysis. 
   
• For medium to large projects, it can make sense to include time and budget for unknown risks as a part of your estimating process. This would especially make sense for projects that have a number of high-risk events. There is some industry evidence that a 5% contingency can be added to the project for dealing with risks that are unknown when the project starts. 
   
• If team members are familiar with the circumstances of the project, they can take an active role in identifying and evaluating project risks. Joint participation can help identify project risks, lay out effective actions to manage the risk and provide consensus and buy-in for execution. 
   
• All projects have some risk, and risk plans come at a cost. Make sure that the effort and cost associated with managing the risks do not exceed the cost to the project if the risk occurs. 
   
• The Project Manager may find that it is hard to find the time to evaluate and manage risks, since there are so many more urgent things to deal with. It may also be hard to motivate customers and team members to deal with risks. However, one of the responsibilities of the Project Manager is to maintain focus on risk management, since it is much more effective to eliminate these potential problems ahead of time, rather than having to resolve the issues when they arrive. In fact, if you are not going to manage risk effectively you should be prepared to utilize the following behaviors instead. 
   
  • Add unjustified padding to your estimates to cover the cost and effort associated with unmanaged risks.
     
  • Prepare ahead of time for whom to blame if things go wrong.
     
  • Be prepared to beg forgiveness by stating you were too busy focusing on delivering results to worry about future events.
     
  • Discuss how you are not a fortune teller, and that the risk could not be foreseen.
     
  • Act casual and say that 'risk happens' - there is nothing you can do about it.
     
  • Eliminate other project management or team infrastructure items to make up for having to solve the problems when they arise. This includes eliminating quality management steps, testing, training, communication, etc..