importance of projct risk managementHave you ever given a serious thought about the importance of project risk management? Do you think that risk identification, analysis and assessment are important for project management?

I believe you will answer the above questions in affirmative. Before I share my opinion about significance of risk management, let me tell you a small story.

Proper Risk Identification, Analysis, And Assessment In Corporate Projects

Morpheus was the most experienced project manager of Zion Corporation. In past, he had successfully completed many technically challenging projects. Customers love him for his strong analytical skills.

In the recent years, Zion has sustained heavy losses due to poor risk management. They hired a new CFO named Lock to turn the corner. Lock was a micro-manager and looked at everything from financial standpoint. This had given him lot of success in the past.

To turn Zion around, Lock initiated a novel project of developing a complex new game system called Matrix. He assigned Morpheus as the lead project manager. He also assigned senior analysts Neo and Trinity to assist Morpheus.

Morpheus enjoyed a good working relationship with Neo and Trinity. They had worked together on many projects in the past. But Lock was a new commodity. Morpheus soon realized that it was very difficult to work with him. Lock had little understanding of the game development and always wanted to talk about finances.

As a diligent project manager, risk management was on top of Morpheus’ mind. He was ably supported by both Neo and Trinity in identifying, analyzing, and resolving risks. But Lock did not appreciate their efforts. On the contrary he was very critical.

Lock would say risk management is a complete waste of time. He thought that professionals should stick to their jobs and solve real problems. They should spend more time of execution and overcome the problems as they come.

Importance of Project Risk Management In The Corporate World

So, how did Matrix end?

Well, that’s a story for another day.

I have a question for you – does this story sound familiar? Have you also experienced senior manager interfering with day to day PM activities and saying risk management has no significance?

Well, I have experienced it many times in my career.

The truth of corporate life is that execution is given more importance over planning. Risk analysis is an important part of planning. It is not given its due importance in the corporate world.

Is this the right way to do projects? Hardly! But that is the fact of corporate life.

Consider following scenarios

PM X: This PM was assigned a complex project. But he plans carefully. He proactively identifies & resolves the risks and meticulously monitors the health of the project. In the end he delivers the project successfully. Since the project did not report any major issues and the project manager did not complain, senior managers think that the project was really simple.

PM Y: This PM was assigned a simple project. He believes that the execution is paramount. He does not plan the project. Due to lack of planning the project receives a lot of issues. The PM reacts to the issues as they come, makes a lot of noise about them, and spends extra hours to overcome them. In the end the project is delivered after a lot of hue and cry. Since there were a lot of issues in the project but the PM overcame those issues through sheer hard work, senior managers think that the project was very complex and the PM did an excellent job.

Who do you think would be rewarded at the year-end appraisal?

In corporate world overcoming hard times is rewarded more than meticulous planning and hence the importance of proactive Risk Management is never recognized.

Conclusion

Senior Managers (and even some project managers) don’t understand the difference between risk and issue. They think that risk management is worthless and overrated.

This is a major stumbling block for diligent PMs.

A good PM should realize that Risk Management is not only about identification, analysis, assessment, and resolution. It is also about stakeholder management. Successful PMs give due importance to stakeholder management.

What is your opinion about risk management process? What problems do you face while doing it? How much support do you get from your senior managers for doing risk management activities?

Please leave a comment.

Praveen Malik

Praveen Malik, PMP is a certified Project Management Professional (PMP®) with a rich 23+ years of experience. He is a leading Project Management Instructor and Consultant. He regularly conducts Project Management workshops in India & abroad. He writes on Project Management and PMP certification on his eponymous blog.