Have you ever endured a project meeting where you spent hours evaluating risks? Afterward, team members walked down the hall saying, “What a waste of time! Now I can get back to the real work.” Today, let’s discuss the use of qualitative risk analysis to get you back on track.
What causes this frustration? First, the evaluation process may not fit the project – too complex for simple projects or deficient for large, complex projects. Second, the process may not fit the maturity level of the project team. Third, team members view the process as burdensome with little value.
Risk evaluation is the process to determine the significance of each risk. There are two ways to evaluate risks:
Watch this YouTube Video: Qualitative and Quantitative Risk Analysis: What’s the Difference?
Watch this YouTube Video: Two Simple Methods to Analyze Project Risks Qualitatively
You cannot respond to all risks, neither should you. Prioritization is a way to deal with competing demands. This aids in determining where you will spend your limited time and effort.
We evaluate in order:
If you say the word “risk” to ten people, each person may think of something different— insurance, threats, investments, bets, or potential loss. As we manage project teams, it's critical that you and your team members have a common understanding of what project risk means. Otherwise, people will be confused by your risk management efforts.
It is no wonder that there is so much confusion about the meaning of risk. Many credible sources provide conflicting definitions. The Merriam Webster dictionary defines risk as “the possibility of loss or injury: peril.”
Risk management standards, guides, and methodologies define risk in many different ways. Some include the possibility of positive risks or opportunities; others do not.
Risk - an uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives. —PMBOK 6th Edition
As projects start, project managers should work with the project sponsor and key stakeholders to clarify the project objectives or goals. Once the objectives are clear, share how risk management can help to achieve the objectives. Furthermore, provide concrete examples that are relevant to the project at hand.
Next, agree on a definition for project risk. I suggest the risk definition from the Project Management Institute’s Project Management Body of Knowledge (PMBOK).
So, here is the PMBOK definition of risk - an uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives (such as scope, schedule, cost, and quality). Let’s break down this definition of risk:
Some people argue that including positive effects in the definition creates confusion. If you decide to leave out the positive effects in the definition, consider how you and your team can identify and seize significant opportunities.
The important thing is to discuss and get agreement with your team about how to define risk. Include the definition in your Risk Management Plan. Clear communication will position your team for greater achievement.
Project managers constantly think about risks, both threats and opportunities. What if the requirements are late? What if the testing environment becomes unstable? How can we exploit the design skills of our developers? Let’s consider a simple but powerful tool to capture and manage your risks—the Risk Register.
The Risk Register is simply a list of risk-related information including but not limited to:
The Risk Register may be created in a spreadsheet, database, risk management tool, SharePoint, or a project management information system. Make sure that the Risk Register is visible and easy to access by your project team members.
The initial risk information is entered when identifying risks in the planning process. For example, project managers may capture initial risks while developing the communications plan or the project schedule. The initial risk information may include the risks, causes, triggers, categories, potential risk owners, and potential risk responses.
As you evaluate your risk in the planning process, you should assign risk ratings for probability and impact and calculate the risk scores.
Next, validate risk owners and have risk owners complete response plans.
Lastly, review and update your risks during your team meetings. Add emerging risks. Other reasons for updating the risk register include change requests, project re-planning, or project recovery.
Risk Register Template
The best-laid plans of mice and men oft go astray. Why? Individuals, teams, and organizations lack the healthy habits of identifying and managing the uncertainty that surrounds their world. Today, let's look at a step-by-step process to improve your strategic planning, analysis, and alignment with a particular focus on risk management.
What I found over the years is the most important thing is for a team to come together over a compelling vision, a comprehensive strategy for achieving that vision, and then a relentless implementation plan. —Alan Mulally
Strategic risk management is a process for identifying, analyzing, and managing risks most critical to the achievement of your goals. While many individuals, groups, or organizations perform risk management informally, a more structured approach has its benefits. For instance, strategic risk management can help you invest your precious time, money, resources and energy where it counts most.
PMI Talent Triangle
The Project Management Institute says, "The ideal skill set (for a project manager) is a combination of technical, leadership, and strategic and business management expertise." —PMI Talent Triangle
Organizations are looking for project managers who can manage projects. Additionally, they want individuals who can help define the organization's strategies and ensure that the projects are aligned with the enterprise goals.
During the project initiation process, a project charter should be completed. The project goals should align and support the achievement of the enterprise goals. Furthermore, the Project Steering Committee can help by defining and using project selection criteria to approve projects that fit the criteria, ensuring better alignment to the organization's goals.
Want to know more? Check out my online course: The What, Why, & How of Powerful Project Charters.
Strategic risk management may be applied to enterprise, portfolio, program, and project levels of an organization.
So, here is a step-by-step process to help you improve your strategic planning, analysis, and alignment.
In the broadest sense, strategic risk management starts at an enterprise level. Even if your organization does not have an Enterprise Risk Management (ERM) Program, you can apply this process to improve your portfolio and program risk management. Lastly, if you only manage projects, consider this process as the context for your projects. Do you understand how your projects align with the organizational vision, mission, values, and goals?
You may be thinking—interesting article. But I want you to be more than interested. I challenge you to take action, particularly if you are an enterprise, portfolio, or program manager. Develop your strategic plan, identify your risks, and start managing those risks. Most importantly, add value by keeping your eye on the achievement of your goals.
Oh, what a year! Thank you for being a part of the Project Risk Coach Community. I hope you have found my articles practical and helpful. In this article, I'm sharing my most popular blog posts of 2018.
So, just how many of you came to the Project Risk Coach website in 2018?
One of my 2018 goals was to have 75,000 people visit the Project Risk Coach website. Thanks to you, I had more than 113,000. Visitors spent an average of 4 minutes and 47 seconds per visit.
Where were the visitors from? Here were the top countries:
You may have noticed that I wrote more about project risk management than ever with a sprinkling of general project management articles. Hopefully, you've gained further insights for identifying, evaluating, responding to and controlling your risks.
I am grateful that the demand for my consulting services, particularly in the P&C insurance industry, has been great in 2018. In 2019, I will be creating more online courses with a focus on project risk management and helping individuals prepare for the PMI-RMP Exam.
I also plan to speak and conduct workshops at a few PMI Chapters in 2019
I see my primary audience as practicing project managers in the United States with a college education. Most are between the ages of 30 and 60 and most work in the financial industry.
Irrespective of where you live or what you do, I hope you will find the Project Risk Coach as a go-to resource for project management tips, tools, and techniques.
Please help me help YOU. It is my sincere desire to provide greater value to you in 2019. Click here to complete a quick survey.
Occasionally, someone will ask me for risk management tips. I think my first answer surprises individuals—write clear goals. Yes, good risk management always starts with clear goals. In today's article, I will give you a simple method to write clear goals every time.
The Crow and the Pitcher is one of Aesop’s Fables. In the story, a thirsty crow discovers a pitcher with water at the bottom, beyond the reach of its beak. The crow did not have sufficient strength to push the pitcher over. He took a different approach. The bird dropped pebbles one by one in the pitcher until the water level rose to the top of the pitcher, allowing the crow to drink.
The crow had a clear goal. Though there were obstacles, the crow creatively solved the problem and achieved his goal. In risk management, we ask ourselves—what may help or hinder our ability to achieve our goals.
“A winner is someone who recognizes his God-given talents, works his tail off to develop them into skills, and uses those skills to accomplish his goals.” -Larry Byrd
Allow me to provide a simple but powerful formula for writing goals. What I am about to share will work for personal goals, enterprise goals, department goals, team goals, or any goal. Furthermore, it works for long-term goals, intermediate-term goals, and short-term goals.
Using this goal formula, you will write specific, measurable goals every time. You will find writing goals easier. Let's start with the formula.
Verb -> Focus -> Target -> Deadline
Example: Increase new members 5% by December 31, 20xx.
Writing goals is an iterative process. Zig Ziglar said, "Don't become a wandering generality. Be a meaningful specific." Write your goals again and again, each time refining and clarifying your thoughts. Revisit them regularly to monitor your progress.
Do you find yourself working overtime, trying to deal with unexpected disruptions? Some negative events that you thought might happen has now occurred. And it's costing you more time and energy than you thought possible. Overwhelmed? Well, let's talk about project risks and issues, the differences, and why it's so important to manage risks.
The Project Management Body of Knowledge (PMBOK) defines risk as, “An uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives.”
Let's examine a risk statement and underscore some key attributes of risks. Here's a risk statement:
Because the project team failed to review the requirements with the users, the project team may not meet the user's needs, resulting in unsatisfied users.
Notice the risk: project team may not meet the user's needs. Think of risk as events or conditions that might happen in the future.
So, how does an issue differ from a risk? Where a risk might happen, an issue has happened. When a threat occurs, it becomes an issue or problem. By the way, when an opportunity occurs, it becomes a benefit.
Are we splitting hairs? The distinction between risks and issues matters for a few reasons.
Risk vs. Issue Debate
Some project managers and risk managers are not convinced that the differentiation between risk and issue adds any value. Even though the risk has occurred (i.e. it is now an issue in terms of the differentiation) there is still uncertainty regarding the impact and the objectives that will be impacted.
While we are on this topic, let's clarify two other terms—assumptions and constraints.
Have you ever conducted a project brainstorming session and found yourself drowning in a cloud of ideas? Not a bad thing, but how can we make sense of the ideas? Well, let's see how to create a project affinity map to sort your ideas. As a bonus, we'll also look at Dot Voting, a simple and quick way to prioritize your ideas.
An affinity map is a tool that can be used to organize ideas into groups based on their natural relationships. The ideas commonly come from a brainstorming session. So, how do project managers actually use this tool?
For instance, a project manager may ask a project team to identify reasons why a project is behind schedule. Imagine that the team identifies fifteen reasons. Next, the project manager asks the team to sort the ideas into groups. The team discovers that the reasons fall into the following groups: processes, people, product, and technology. This is a great way to create a Cause and Effect Diagram.
There are countless ways to use a project affinity map after brainstorming. Here are some examples. Identify and sort:
So, what steps do we take to create an affinity diagram? Let's walk through the process.
When you complete the exercise, the team should have a deeper and more comprehensive understanding of the issues. Sometimes the team may need additional help to identify the most significant items. Let’s look at another simple tool to prioritize the items.
Cling On Sheets
Have you ever used Cling On Sheets? They work like a whiteboard, but the nice thing is that you can put them anywhere on a dry wall and then move them as needed. After my brainstorming sessions, I take them back to my desk so I can complete my documentation and minutes.
The Affinity Map and Dot Voting provide a powerful one-two punch. You and your team will be able to sort and prioritize the ideas in a quick and organized manner. Give it a try!
Someone decided that it was a good idea to bring project management into your organization. Perhaps it was your CEO or operations manager or IT Director. But for some reason, it never took off. Project management has not been supported by your culture. Let's look at how to get things in flight with a project steering committee.
Start with an evaluation. Here are some questions to aid you in discovering the deeper issues. Interview your stakeholders to get their feedback.
Sometimes, the person responsible for project management (e.g., PMO Director or Project Services Manager) fails to involve stakeholders in evaluating project management. This person makes changes in project management with little to no input from the people being impacted. A better approach is to get regular feedback through a Project Steering Committee.
The purpose of the committee is to improve process and results. The Steering Committee determines the required changes, how much change is needed, and how fast changes need to occur.
It is best if an influential senior member of your organization sponsors the committee. The sponsor helps to establish the vision and ensures the commitment of resources. But this person doesn’t have to manage the committee.
The Steering Committee may be managed by the person responsible for project management, a person with the proper credentials and experience. The team should include representatives from different areas such as IT, project management, and business operations. Ideally, team members have had project management training and have project experience.
An optimal team size is six to eight people. Team members should serve no longer than a year. You may wish to implement a staggered rotation where you add a couple of new team members and drop a couple of team members periodically.
The Steering Committee may meet as often as desired—for example, monthly, quarterly, or twice per year.
How should the team approach the evaluation and improvement? Determine the problems and define a plan for improvement.
Try executing the changes for one of your projects to test the improvements.
Once the team has executed and tested the improvement plan, the team should report their findings to the Steering Committee. The team should recommend one of the following:
Implementing project management in an organization is not an easy task. Why? Because people are resistant to change, particularly when individuals do not understand the reason for the changes. Be patient. Listen carefully. Evolve at a healthy pace, not too fast and not too slow. Your Steering Committee can provide the feedback necessary to guide your pace and maturation.
A common denominator in challenged projects is poor communication. What are the results? Stakeholders make bad assumptions. Team members don't trust one another. Work has to be redone. Let’s look at ways to improve our communication by overcoming five bad communication habits.
“The single biggest problem in communication is the illusion that it has taken place.” —George Bernard Shaw
Busy Billy reviews the project charter to his team and other stakeholders in the kick-off meeting. Then he moves on to other project management tasks and never mentions it again.
How to improve: Things pop up in projects and people want to know if it's in scope. At moments like these, project managers should review the charter with the project team to ensure that the team is aligned with the original intent of the project.
Some project managers email the project documents to all stakeholders including the project schedule, budget, process improvement plans, weekly status reports, project risks, and stakeholder analysis, to name a few. What do you think the stakeholders do? Yes, most ignore the email and miss critical information.
How to improve: Tailor your communication to the needs of your stakeholders. When analyzing your stakeholders—particularly your high-power/high-interest stakeholders, ask about their communication preferences. What information would they like to receive? How would they like to receive it?
We all develop habits, some good and some bad. Are you one of those people who largely communicates in only one or two ways such as email and phone.
How to improve: Use a wider variety of communication channels including but not limited to:
Also, have more face-to-face communication when possible. This allows you to improve communication. How? Body language and facial expressions can greatly enhance the understanding between you and your stakeholders.
Jovial Julie thinks people should understand things through osmosis. She jokes, “Why should I have to be the one to carry the communication burden? We have professionals on my teams. I’ve got more important project management responsibilities to take care of.” Really?
How to improve: Be intentional about your communication. Develop and execute your communication plan. Periodically, review and update the plan. Ask for feedback from your stakeholders on how you can improve your communication.
How often have you attended a project meeting and left mumbling—what’s was that all about? Many meetings are a complete waste of time. Why? Little thought in the planning.
How to improve: First, Develop and distribute your meeting agendas prior to your meetings. Ask the meeting participants if they have agenda items they would like to include. Attach materials that participants should read and bring to the meeting.
Second, invite subject matter experts who can communicate the needed information and help the team analyze things.
Third, determine how you will facilitate the discussion points. Are there items in which you wish to brainstorm? Should you present a prototype? Will you illustrate with an example?
Lastly, determine how decisions will be made. Will the project sponsor make the final decision? Does the project team have the authority to make the decision? Perhaps, you—the project manager—plans to get the team’s input and make the decision.
The Purpose Driven Project Manager. Got soft skills? Discover how to improve your communication, develop trust within your teams, enhance your decision making, and run productive meetings in my book—The Purpose Driven Project Manager.