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?
Qualitative risk analysis is a numeric estimate of the overall effect of risk on the project objectives such as cost and schedule objectives. The results provide insight into the likelihood of project success and is used to develop contingency reserves.
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!
How to Actually Perform a Qualitative Risk Analysis Mini-Course. I’ve developed this course to help you quickly review the concepts of qualitative risk analysis. Click here to enroll!
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.
Successful project managers have a common trait – they identify and manage risks. Let's look at seven tools and techniques to identify risks.
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. Furthermore, project teams are not aware of emerging killer risks.
The risk exposure is greatest at the beginning of projects. The uncertainty is high because there is less information in the beginning of projects. Wise project managers start identifying risks early in their projects. Capture these risks in your project charter.
Want to know how to improve your risk identification? Identify risks:
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
Every project manager deals with risks. We all face significant uncertainty. Allow me to share seven things you ought to know about identifying risks.
Project managers must address unrealistic time frames where failure seems unavoidable, scope creep, ambiguous requirements, delays from third parties, and the lack of required skills, to name a few.
How do we manage risks and the causal factors?
Risk management begins with the practice of identifying risks. In this process, we consider future events or conditions that may impact our ability to achieve our goals. Risk identification includes figuring out where, when, how, and why such events may occur.
Not sure how to get the most value from risk identification? Well, here are answers to common questions. If you understand these basic principles, you have the foundation for an effective and efficient risk identification process.
[Tweet “Risks cannot be managed if they are not first identified. -Harry Hall”]Continue reading
Projects can be engaging and even enjoyable, or it can be a source of aggravation and stress. If you put some care and time into identifying, analyzing, and managing your project stakeholders, you’ll have a better project experience and improve your chance of success.
Remember what Charles Schulz said through the character of Linus: “I love mankind…it’s people I can’t stand!!” Schulz is saying that he loves mankind. But the problem is that individuals have flaws that can make life difficult.
One of the most critical elements of project management is developing relationships with key stakeholders—individuals, groups, and organizations. It is through these relationships that we can better define and control scope, understand requirements, mitigate risks, and improve project processes. One of the top reasons that projects succeed is stakeholder involvement.Continue reading