risk management Archives

Why Is Importance Of Project Risk Management Overrated?

Have 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.
(more…)

By Praveen Malik|2022-11-18T10:19:57+00:00January 9th, 2019|Risk Management|0 Comments

Project Management Risks – Questions and Answers (Part 1)

Project Management Risk “To save all we must risk all”, Friedrich Schiller once said. If he were a project manager today, he might say, “To save all we must manage all risks”. Books, journals, corporate websites, YouTube, and discussion forums burst of information on risk management, because risk is inherent to every project just like uncertainty is inherent to any risk. Risk management is essential if you want your project to succeed. This article answers five questions on project risk management:

What is the best definition of project risk?
What’s the difference between a risk and an issue?
How do you identify risks?
How many risks should be on your risk log and for how long?
How do you manage project risks?

1. What is the best definition of project risk?

One of Oxford Dictionary’s 1000 most frequently used words, risk refers to the possibility of something unpleasant, dangerous, or harmful occurring. This negative connotation of risk is so deeply rooted in many people’s minds that it takes some effort to get used to the project management definition of risk: “an uncertain event or condition that, if occurs, has an effect on at least one project objective,” according to the PMBOK.

Risk can be any uncertain event that, if it happens, will be good or bad for the project. Negative risks become threats to the project, while positive risks become opportunities. Risk management should address both types of risks, minimizing threats and maximizing opportunities.

Project risk is something you can control. You must manage risks if you want your project to succeed. However, be aware that there are risks called black swans that you cannot include in your risk analyses. I’ve explained why these risks are special and what you can do to minimize their consequences in another article.

2. What’s the difference between a risk and an issue?

A risk is something uncertain, so it will happen or not during your project. An issue is an event that has happened or that you know for sure it will happen, even though you might not know when. A risk that occurs becomes an issue. This might be bad news or good news for you and your project, depending if the risk is negative or, respectively, positive. A positive risk becomes an opportunity for your project—for example, the opportunity to finish earlier than scheduled, or below budget, or anything that you might otherwise consider “lucky”. Both risks and issues have causes and consequences. Risk management is the way to deal with risks while problem solving is the way to deal with issues. (more…)

By Cristina Neagu|2022-11-18T10:20:02+00:00May 11th, 2015|Risk Management|2 Comments

Brainstorming – Trendy or Not?

It’s popular. It’s a classic. Those who endorse it say it’s an effective technique for generating many ideas but not a standalone method, so it should be used with other creative techniques. Those who criticize it say it generates mediocre ideas that are likely never implemented as solutions to problems. But this 60-year old technique called brainstorming – whose effectiveness is an evergreen hot topic among researchers, users, and critics – helps to identify project risks.

Brainstorming – The Definition

According to Merriam-Webster, brainstorming is “a group problem-solving technique that involves the spontaneous contribution of ideas from all members of the group; also: the mulling over of ideas by one or more individuals in an attempt to devise or find a solution to a problem”.

Brainstorming – The Story

A technique with a catchy name, brainstorming has been around since the 1950s when Alex Osborn’s book Your Creative Power was published, becoming a best-seller. This book may be “an amalgam of pop science and business anecdote”, as Jonah Lehrer called it in a New Yorker article that triggered lots of e-ink on discussion forums, but brainstorming is easy to implement and generates many ideas. Besides that, it’s a great team-building exercise, which may also justify its popularity with businesses. A brainstorming session emphasizes the quantity, not quality, of ideas and one of the rules to brainstorming sessions is no criticism so that people do not fear their ideas are rejected by the group and, thus, limit their imagination.

Brainstorming Types

There’s individual and group brainstorming, with individual brainstorming being better for problem solving and group brainstorming better for identifying project risks. Group brainstorming draws from the intelligence and experiences of more people but ideas expressed loudly may be biased since people do worry about others’ opinions even if one of Osborn’s rules for group brainstorming is “no criticism”. Online brainstorming—a sub-type of group brainstorming—uses e-brainstorming tools to help remote teams share their ideas in real time. (more…)

By Cristina Neagu|2022-11-18T10:20:02+00:00January 16th, 2015|Business Management, Project Management, Risk Management|0 Comments

Preparing for the Inconceivable Risk—Are You Ready for Black Swans?

Black swan risk When rare and extreme events never observed before occur, they have major consequences and sometimes even global impact. World War I, AIDS, 9/11, but also the advent of Internet are all black swans, or extremely rare, unprecedented events with inconceivable consequences. The term black swan was coined by the philosophical essayist Nassim Nicholas Taleb in the book The Black Swan: The Impact of the Highly Improbable. Taleb uses the term black swan to refer to extremely rare, very difficult to predict, and massive-impact events. Zooming into the realm of project management, when negative black swans (unconceivable risks, extremely unpredictable, and improbable) occur, they lead projects to failure.

How can Managers Plan for Black Swans?

Inherently, black swans cannot be forecast—they are unique events that are not in statistics and their total impact on a project is impossible to predict, which makes them most dangerous to any project. While managers cannot plan for such risk, simply taking no action and hoping a black swan doesn’t strike their project is not the wisest thing to do. But if they cannot plan for the unplanned, what can they do?

Grey Swans vs. Black Swans

First, managers can learn to distinguish black swans from grey swans and prepare for these. Not all project failures are due to black swan events, but to grey swans, which are rare but predictable risks. Professor Elisabeth Paté-Cornell from Stanford argues in an article in Risk Analysis that black swans are extremely rare, but people in industry and finance often use black swans in the aftermath of a disaster as an excuse for poor planning. In my opinion, this may also happen in many major IT projects that fail, for example those going over budget by 200 percent and over schedule by 70 percent—surprisingly, a situation that strikes one in six projects according to the authors of a Harvard Business Review article. Although managers blame black swans for such project failures, often their risk analysts have failed to factor in grey swans. Identifying and mitigating grey risks should be part of effective risk management. (more…)

By Cristina Neagu|2022-11-18T10:20:05+00:00August 1st, 2014|Risk Management|Comments Off

How to Minimize the Risk of Delaying Your Project by a Customer

When it comes to project delays there are several factors that can lead to such situation. The customer is one of them and there are two issues that can be discussed: what to do when the delay already happened and the other how to minimize the risk of happening such a delay.

Customer delaying the project is a major risk that should not be overlooked in any project. Minimizing this risk is not easy to be accomplished and its probability differs from client to client. But in case it happens mitigation actions must be performed.

Write clear specifications

In order to keep things clear and avoid misunderstandings it is important to create a solid project plan with clear specifications regarding possible project delays and the measures and penalties that apply. When it happens communicate clear factual evidence of the cost and timescale impact of delays caused by the customer. This is very important to keep things clear and to avoid the situation when the customers may argue that it is his fault and the contractor is suspected for hiding other delays behind those caused directly by them. Issues need to be resolved in a timely fashion to minimize risk and loss on both sides.

When dealing with external clients and when creating a contract it is advisable to add a clause that states that the client is responsible for prompt responses to ensure the project is not delayed. If the client provides delayed responses, actions etc. that lead to project delays then it nullifies timeline clauses in the contract. If the contract doesn’t have this kind of specifications then it is preferred to get a lawyer, or a better one in case a lawyer already exists.

In return when dealing with internal team the project manager has to take the same actions. Although there are no contractual terms that can generate a direct financial penalty, it will get noted at review time and possibly no raise…

Know the customer management

Avoiding the project delay problem is not a healthy thing to do. Escalation might reveal there are issues on the customer side where their project manager is not communicating clearly enough internally. This is why when contracting a new project it is good to know the customer and almost a must to know his management team. Knowing what to expect from them can decide whether to accept the new contract or to reject it. And even if the project is accepted contractual terms can be added to compensate the lack of professionalism on the customer management side. (more…)

By Lucian Ioan|2022-11-18T10:20:08+00:00March 29th, 2013|Business Management, Project Management, Risk Management|1 Comment

What to Do when the Customer is Delaying Your Project

Contrary to the popular belief, the customer is not always right. In fact, sometimes the customer may be the one delaying the project by not giving the approval of a completed phase when required, by not communicating effectively, by missing deadlines for the review of the deliverables – shortly, by being aloof to the project.

Customer’s delay translates into delay of the project, monetary loss, and decrease of the motivation and morale of the project team. Sometimes the customer may be too busy, especially if he or she represents a large organization and yours is just a side project for them. Other times, the customer may not see the implications of his or her attitude or may be just relying on the project manager’s decisions. Regardless of the motivation, customer’s delaying the project is a problem that you, as the project manager, must solve.

Ideally, this situation could have been avoided by accurate project planning. A communication plan, including deadlines to be respected by both sides, and monetary penalties for project delays should have been approved by the customer. More important, since customer’s performance is actually a major project risk, mitigation plans for it should have been included in the risk management plan. However, in small projects, sometimes this documentation or part of it has been overlooked. (more…)

By Cristina Neagu|2022-11-18T10:20:09+00:00February 25th, 2013|Business Management, Project Management Software, Risk Management|1 Comment