Imagine you have a large amount of credit card debt. You decide to eliminate one of the causes of your debt. So, you cut up your credit cards.
What if you had an opportunity to increase company revenue by getting a product to market a few months early? You could assign your most skilled resources to your critical path tasks.
In our projects, we face threats that may limit our ability to achieve our goals. We also see opportunities, if properly seized, that could allow us to make greater progress. Our job is to treat risks to enhance opportunities and reduce threats. We can optimize our risk responses over time.Continue reading
I fear that many project managers live by the letter of the law and may fail to gain the true benefits of risk management. These individuals are too concerned with checking boxes and making the risk management processes overly complex. Let’s look at some common mistakes and how to overcome them.
Every project is different. Wise project managers tailor their risk management plan to each project. Pick only the necessary inputs and tools and techniques. And speak in a manner that your sponsor, project team, and stakeholders understand. If you wish to introduce new terms (e.g., risk attitude, risk tolerance, Monte Carlo), be sure to define them.Continue reading
Do you remember the first time you missed a project deadline? I do. I recall the embarrassment for me and my team. I promised myself I would take proactive steps to mitigate this outcome for future projects including the use of quantitative risk analysis.
Why do projects take longer than expected? Often times, risks occur and project managers lack adequate schedule reserves.
Once burned, many project managers start a bad habit – padding their project schedules. If a project is estimated at 120 days, the project manager may add a 10% pad, an additional 12 days. The project manager estimates the project duration to be 132 days.
Padding is a quick and dirty method. It provides reserves, but let’s look at a better way to estimate reserves.Continue reading
Project managers should be prepared to perform different types of risk analysis. For many projects, the quicker qualitative risk analysis is all you need. But there are occasions when you will benefit from a quantitative risk analysis.
Let’s take a look at this type of analysis: What is it? Why should we perform it? And when should it be performed?Continue reading
Winston Churchill said, “True genius resides in the capacity for evaluation of uncertain, hazardous, and conflicting information.” In this article, I share 30 risk evaluation tips to help you tap into your genius. Enjoy!
Risk velocity is the time to impact. Think of velocity as an estimate of the time frame within which a risk may occur.
When the velocity is low, we have more time to respond to the risks. For a threat, we may take steps to reduce the probability and impact. The risk owner has time to develop a contingency plan (i.e., a plan we will execute if the risk occurs) and a fallback plan (i.e., a plan we will execute if the contingency plan fails).
If the velocity is very high, threats strike quickly. Thus, these risks are more likely to become issues, costing more time and money. Here are some causal factors for high-velocity risks:
Imagine that two risks have a risk score of 20 on a scale of 25. But Risk A will likely to occur in a two to three weeks where Risk B will take at least six months. Which risk merits your attention most? See the difference?Continue reading
We all have biases; many are helpful. In projects, we have biases towards successful projects and motivated teams. If a project sponsor says that schedule is the top priority, the project team has a bias towards meeting the schedule.
However, some biases are harmful. Stakeholders may attempt to sway project decisions in unfair ways. These biases undermine the health of the project and breed distrust.
Let’s look at different types of biases and ways to reduce bias in the risk evaluations. These steps will help ensure the right decisions are made for the right reasons.
Stakeholders may exhibit different types of bias. PMI’s Practice Standard for Project Risk Management explains motivational bias is “where someone is trying to bias the result in one direction or another.” Cognitive biases occur as people make inferences in an illogical fashion. Cognitive biases are based on people’s perceptions.
Uncloak the bias. Project managers should watch and listen for bias. Expose the bias in one-on-one meetings or team meetings, whichever is most appropriate. Be careful – do not judge or challenge too quickly. Be slow to speak. Listen. Seek to understand.
Have open conversations. When a bias is not understood, the project manager should dig deeper. If the bias is based on the wrong perceptions, provide the facts. If the bias is ill intended, ask non-threatening questions that allow the individual to understand how the bias may negatively affect the project.
Reduce the subjectivity. Project managers use qualitative methods to evaluate risks quickly. Some project managers fail to understand that they may be creating greater bias. Let’s look for ways to reduce the subjectivity while keeping the convenience and speed of the qualitative methods.
For small projects, I use a KISS (Keep It Super Simple) Method for qualitative risk assessments. This one-dimensional technique involves rating risks as:
While the KISS Method is a simple and quick way to prioritize risks, it is also subjective and open to greater bias. When I use this method, I focus on open and honest conversations about the ratings.
A more common qualitative method is the two-dimensional Probability/Impact matrix. With this method, we rate probability and impact on a scale such as 1 to 10, with 10 being the highest. This method provides a more in-depth analysis of risks as compared to the KISS Method. However, a scale of 1-10 is still highly subjective.
How can we reduce the subjectivity?
The first step is to define qualitative terms (e.g., Low – Very High) for the ratings. Here is an example:
Another step is to define ranges for the scale (e.g., 0-5% for Low). Defining the scale reduces subjectivity and drives greater consistency in the ratings.
If the probability or likelihood of a risk is approximately 15%, we assign a probability rating of 5. If the potential impact on the budget or schedule is 55%, we assign an impact rating of 9. The resulting risk score would be 45 (i.e., 5 x 9 = 45).
If stakeholders need objectivity, perform a quantitative risk analysis. Quantitative risk analysis takes more time than qualitative risk analysis. However, this method provides objective information and data for business decisions.
Often project managers start with a splash. They get the team together, identify lots of risks, and enter them into an Excel spreadsheet. However, the risks are never discussed again.
What happens when project managers and their team fail to identify risks in an iterative fashion? Teams spend their time and energy on things that do not matter. Risks are not identified and turn into more costly issues. Project teams are not aware of emerging killer risks.Continue reading
Vague risk statements lead to poor risk response planning. When organizations or project teams fail to respond to significant risks (i.e., threats and opportunities), these groups fail to achieve their goals and reach their potential. Risk management starts with identifying risks and writing clear risk statements.
Why do people define risks poorly? I am convinced that most people simply don’t know how. Allow me to share some simple tips that can improve your ability to write clear risk statements.
When I ask someone to identify a risk, individuals often respond with something like “there is a conflict between two executive sponsors” or “the estimates are incorrect” or “we are experiencing system outages.” But these are facts or conditions that are true, not statements of uncertainty. In other words, these are causes that give rise to uncertain events or conditions.Continue reading
Have you ever tried to address an issue and created a different problem?
A response to risk can create other risks. These secondary risks may be more significant than the primary risks if we are not careful.
One of the Pink Panther cartoon episodes pits the Pink Panther against a mouse in his house. The mouse was driving the Pink Panther crazy; he had to find a way to eliminate this problem.
The Pink Panther, dressed in a catsuit, chased the mouse out of the house and down the street. The neighborhood dogs pursued the “cat.” The Pink Panther ran for his life but was torn to shreds.
A secondary risk is a risk that is created by a response to another risk.Continue reading