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Risk Analysis — The Managing Up Secret Weapon

This is a guest article by Dana Brownlee from professionalismmatters.com.

One of the most common questions I get when speaking to groups is “How do you deliver a difficult message to/push back on senior leaders – particularly the difficult ones?” I certainly understand the popularity of the question because that’s a sticky situation for sure. While project managers and others often find themselves in opposition to the boss’ ideas, recommendations, or preferred course of action, telling the boss they have an “ugly baby” is a different story.

Credit : gorodenkoff | iStockphoto       

One of my favorite suggestions for this unenviable predicament is using risk analysis. Indeed, I think risk analysis can be the secret weapon of managing up! Why? Because risk analysis provides an opportunity for you to focus the discussion on the objective (often quantifiable) facts and away from the more emotional opinions.

In my book The Unwritten Rules of Managing Up: Project Management Techniques from the Trenches I discuss the importance of using risk analysis to make your case for a particular point of view. Consider the following example…

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Risk Management Wisdom and Humor of the Ages

Most of us have personal and career goals. Our ability to achieve those goals is dependent on our risk management skills, that is our ability to manage opportunities and threats. We seek to make good things happen and to eliminate or reduce the bad things.

Books of Quotes

Through the years, I have captured my favorite quotes related to the art and science of risk management. I hope you enjoy the insights as well as the humor.

1. "The greatest glory in living lies not in never falling but in rising every time we fall." —NELSON MANDELA, SOUTH AFRICAN STATESMAN

2. "Nothing can stop the man with the right mental attitude from achieving his goal; nothing on earth can help the man with the wrong mental attitude." —THOMAS JEFFERSON, U.S. PRESIDENT

3. “People with goals succeed because they know where they are going.” —EARL NIGHTINGALE, MOTIVATIONAL SPEAKER AND AUTHOR

4. “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 BIRD, NBA PLAYER AND COACH

5. "The world is getting to be such a dangerous place, a man is lucky to get out of it alive." —W.C. FIELDS, COMEDIAN AND MOVIE STAR

"They that are on their guard and appear ready to receive their adversaries are in much less danger of being attacked than the supine, secure and negligent." —BENJAMIN FRANKLIN, SCIENTIST, PUBLISHER, AND DIPLOMAT 

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6. “There is a myth that people hate change. Not true! What scares them isn’t change, it’s uncertainty. They worry about whether the changes are good or bad. People love change when it involves pleasant surprises. What they fear are the unpleasant ones.” —ALAN MULALLY, CEO OF FORD MOTOR COMPANY

7. “Character may be manifested in the great moments, but it is made in the small ones.” —WINSTON CHURCHILL, PRIME MINISTER OF THE UNITED KINGDOM

8. “The only limit to our realization of tomorrow will be our doubts of today. Let us move forward with strong and active faith.” —FRANKLIN DELANO ROOSEVELT, U.S. PRESIDENT

9. "A good plan, violently executed now, is better than a perfect plan next week." —GEORGE S. PATTON, GENERAL IN THE U.S. ARMY

10. “The man who comes up with a means for doing or producing almost anything better, faster, or more economically has his future and his fortune at his fingertips.” —J. PAUL GETTY, ANGLO-AMERICAN INDUSTRIALIST

11. "Not only do I not know what's going on, I wouldn't know what to do about it if I did." -GEORGE CARLIN, COMEDIAN

12. "Keep your friends close, and your enemies closer." —SUN-TZU, CHINESE GENERAL AND MILITARY STRATEGIST

owl reading a book

13. “A life spent making mistakes is not only more honorable but more useful than a life spent in doing nothing.” —GEORGE BERNARD SHAW, IRISH PLAYWRIGHT RISK

14. “They that are on their guard and appear ready to receive their adversaries are in much less danger of being attacked than the supine, secure and negligent.” —BENJAMIN FRANKLIN, SCIENTIST, PUBLISHER, AND DIPLOMAT

15. “When you arrive at a fork in the road, take it.” —YOGI BERRA, BASEBALL PLAYER

16. “100 percent of the shots you don’t take don’t go in.” —WAYNE GRETZKY, PROFESSIONAL HOCKEY PLAYER

17. “You decide what it is you want to accomplish and then you lay out your plans to get there, and then you just do it. It’s pretty straightforward.” —NANCY DITZ, MARATHONER

18. “Treat people as if they were what they ought to be and you help them become what they are capable of being.” —JOHANN WOLFGANG VON GOETHE, GERMAN WRITER AND POLYMATH

19. “The secret of life is honesty and fair dealing. if you can fake that, you’ve got it made.” —GROUCHO MARX, COMEDIAN AND MOVIE STAR

20. “I could tell that my parents hated me. My bath toys were a toaster and a radio.” —RODNEY DANGERFIELD, COMEDIAN

 

3 Ways Your Team Makes Your Project More Risky

This is a guest article by Elizabeth Harrin from GirlsGuideToPM.com.

Much of the time, risk management at the beginning of a project looks like getting the team in a room to review the whole project and work out what might be coming that could affect how the project proceeds.

The project manager writes up the discussion in the risk register along with what the team is going to do to avoid or amplify (in the case of positive risk) the risks. As the project progresses, more risks are identified, dutifully added and managed.

Team Risks

Risks Caused by Team Members

What’s happening here is that we’re looking at the work and impacts on the work. This approach to risk management is very task driven. We ask questions like:

  • What might prevent us from hitting that milestone on time?
  • What might mean we need to ask for a budget increase during this phase?
  • What quality problems might we come across that would give the client an issue?
  • Who might be a difficult stakeholder on the project?

These are all valid questions. But they miss one crucial area that massively affects everything on the project every day. Us. The project team.

Our skills, ability to work together as a team, or lack thereof, present the biggest chance of success for the project and also the biggest risk.

Here are some examples of how the people on your team make your project inherently more risky.

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8 Powerful Ways to Manage Project Quality

Why is project quality often neglected? Well, it's hard to manage things we don't understand. And quality seems to be an esoteric concept to many people. Therefore, let's define quality and discuss some practical ways to manage project quality.

Project team focused on quality

Project team focused on quality

Quality Management Tips

1. Make quality management pragmatic. Many people do not invest appropriate effort towards quality because they do not understand it. The Project Management Institute defines quality as “conformance to requirements and fitness of use.” According to this definition, quality comes through clearly defining and meeting the requirements of the users and stakeholders.

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Evaluating Risks Using Qualitative Risk Analysis

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.

Business people in a meeting analyzing content

Qualitative Risk Analysis

What is Risk Evaluation?

Risk evaluation is the process to determine the significance of each risk. There are two ways to evaluate risks:

  1. Qualitative Risk Analysis. Qualitative analysis such as rating probability and impact should always be performed. This allows you to quickly prioritize and rank your risks.
  2. Quantitative Risk Analysis. Quantitative analysis is not always performed. This analysis requires more time but provides more data to aid in making decisions. (We will cover quantitative evaluations in another post.)

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

Why Evaluate/Prioritize Project Risks?

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:

  •  To have the greatest impact. Eighty percent of the impact will come from twenty percent of the risks. What are the vital few things that we should do that will have the greatest impact on minimizing threats and maximizing opportunities?
  •  To respond wisely and appropriately. The goal of evaluating risks is to discriminate between one risk and another. This aids us in determining the amount of effort to invest in developing response plans.
  •  To assign resources suitably. Assign your most skilled, knowledgeable resources to the projects with the greatest risk.
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What is Project Risk?

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.

what is project risk?

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.

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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).

PMBOK Definition of Project Risk

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:

  • Uncertain event or condition. Risks involve uncertainty. When identifying risks, I ask teams to focus primarily on the uncertain events or conditions that may have the greatest impact on the project, not the trivial things.
  • If it occurs. The uncertain event or condition may or may not occur. If a threat occurs, it becomes an issue or problem. If an opportunity occurs, it becomes a benefit. So, risks are things that may occur; issues and benefits are things that have occurred.
  • Positive effect. When I share the PMBOK’s definition of risk, I ask if anything seems strange about the definition. Many people say it seems odd that risk can have a positive effect. I provide examples of how “opportunities” or up-side risks can help achieve the project objectives.
  • Negative effect. I do not normally have to spend much time on the negative effect. This is how most people think of risk. I introduce the term “threat” for the downside risks.
  • Project objectives. To bring value to the risk management processes, keep your teams focused on project objectives such as scope, schedule, cost, and quality. The heart of risk management is helping your sponsor and team to achieve their objectives.
  • Minimizing the use of the term risk. Because the term “risk” is often misunderstood, I use the terms threats and opportunities more often. If I am leading an exercise to identify risks, I will ask the participants to identify threats or potential problems first. Then I ask the participants to identify opportunities or potential benefits to the project.

What About Project Opportunities?

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.

How to Build and Use a Risk Register

picture of a risk register and watchProject 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.

What to Include in a Risk Register

The Risk Register is simply a list of risk-related information including but not limited to:

  • Risk Description. Consider using this syntax: Cause -> Risk -> Impact. For example: “Because Information Technology is updating the testing software, the testing team may experience an unstable test environment resulting in adverse impacts to the schedule.”
  • Risk Owner. Each risk should be owned by one person and that person should have the knowledge and skills to plan and execute risk responses.
  • Triggers. Triggers indicate when a risk is about to occur or that the risk has occurred.
  • Category. Assigning categories to your risks allows you to filter, group, analyze, and respond to your risks by category. Standard project categories include schedule, cost, and quality.
  • Probability Risk Rating. Probability is the likelihood of the risk occurring. Consider using a scale of 1 to 10, 10 being the highest.
  • Impact Risk Rating. Impact, also referred to as severity or consequence, is the amount of impact on the project. Consider using a scale of 1 to 10, 10 being the highest.
  • Risk Score. The risk score is calculated by multiplying probability x impact. If the probability is 8 and the impact is 5, the risk score is 40.
  • Risk Response Strategies. Strategies for threats include: accept the risk, avoid the risk, mitigate the risk, or transfer the risk. Strategies for opportunities include: accept the risk, exploit the risk, enhance the risk, or share the risk.
  • Risk Response Plan or Contingency Plan. The risk owner should determine the appropriate response(s) which may be executed immediately or once a trigger is hit. For example, a risk owner may take immediate actions to mitigate a threat. Contingency plans are plans that are executed if the risk occurs.
  • Fallback Plans. For some risks, you may wish to define a Fallback Plan. The plan outlines what would be done in the event that the Contingency Plan fails.
  • Residual Risks. The risk owner may reduce a risk by 70%. The remaining 30% risk is the residual risk. Note the residual risk and determine if additional response planning is required.
  • Trends. Note if each risk is increasing, decreasing, or is stable.

Other Risk Register Tips

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 risk management processes include: 1) plan risk management, 2) identify risks, 3) evaluate/assess risks, 4) plan risk responses, 5) implement risk responses, and 6) monitor risks.

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.

Other Resources:
Risk Register Template

How to Improve Your Strategic Planning, Analysis, and Alignment

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.

rocket

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.

The Scope of Strategic Risk Management

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. 

Let's Do Some Strategic Planning

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?

  1. Define the Vision, Mission, and Values. What is your preferred future? What is the purpose of your organization? What do you value?
  2. Define Long-Term Goals. What are the long-term goals (typically 3 year goals) to support the mission? These goals will likely be broader than your annual goals.
  3. Define Annual Key Performance Indicators (KPIs). What will you measure? For example, you may have a KPI for profit or expenses. What is the target for the KPI? How do you calculate the KPI?
  4. Define Annual Goals. Using the KPIs, we can define specific, measurable goals. For example: “To increase profit by 5% over the prior year by 12/31/XX.” Cascade the goals. Lower level goals should align and support higher level goals. For example, you may have a hierarchy like this:
    • Corporate Goals (i.e. Enterprise Goals)
      • Business Goals (i.e. Business Unit or Division Goals)
        • Functional Goals (i.e. Department Goals)
          • Team Goals (i.e. Project Goals)
  5. Define Strategy. How will you get from your present state to the desired future state? Strategies may include action plans, projects, and programs.
  6. Identify Risks. Here is where risk management comes into play. What are the opportunities and threats for each goal? Who are the risk owners?
  7. Analyze Risks. What is the priority of the risks? Which risks matter most? At a minimum, complete a Qualitative Risk Analysis to prioritize the risks. In some cases, you may wish to complete a Quantitative Risk Analysis.
  8. Plan Risk Responses. Develop the risk response plans for the highest risks.
  9. Build a Scorecard. Develop a scorecard where actual results are reported for each of the goals. Determine the frequency of reporting (e.g., monthly, quarterly, bi-annual, annual).
  10. Monitor Risks. Periodically review the risks. Update assessments and response plans as needed.

Start Your Strategic Planning

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.

How To Write Clear Project Goals

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 Fable of the Crow and the Pitcher

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.

rocket

“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

Write Clear Goals Every Time

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.

  1. Verb. I typically start goals with a verb such as increase, decrease, maintain, or have. (I use verbs like implement, develop, establish, utilize, or revise for strategies, broad statements of direction.)
  2. Focus. What is the focus of the goal? The focus of the example above is "new members."
  3. Target. The target specifies the measure. The target may be a specific amount, range, or percentage.
  4. Deadline. The deadline makes the goal time-based. A goal without a deadline is simply a wish.

Personal Goal Examples

  • To maintain my exercise of 3 times per week for 45 minutes through the end of the year.
  • To increase my 401K contributions by 5% over the prior year by December 31, 20xx.
  • Business Goal Examples

  • To increase the net income by 10% by the end of the third quarter.
  • To decrease auto claims cycle time from an average of 12 days to 8 days by the March 31, 20xx.
  • To have 5 project managers achieve their Project Management Professional (PMP) designation between April 1 and June 30 of 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.

    Project Risks and Issues – What’s the Difference?

    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.

    What is Risk?

    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.

    • Cause: Failure to review and validate the requirements
    • Risk: Project team may not meet the user's needs
    • Impact: Users will not be satisfied with the product

    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.

    What is an Issue?

    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

    Why Distinguish a Risk from an Issue?

    Are we splitting hairs? The distinction between risks and issues matters for a few reasons.

    • Proactive Management Saves Time. “An ounce of prevention is worth a pound of cure.” Project managers should manage risks proactively. Project managers can save valuable time through prevention. As often noted, Project managers can eliminate up to 90% of threats through risk management.
    • Measure of Management Effectiveness. If a project manager is experiencing lots of issues, it may be a sign that the project manager has not been managing the project effectively. 
    • Different Type Response. Issues require a different response than threats. Project managers respond to threats with different strategies: avoid, mitigate, accept, or transfer. Issues require corrective action to bring the performance of the project in alignment with the project management plan. 

    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. 

    What about Assumptions and Constraints?

    While we are on this topic, let's clarify two other terms—assumptions and constraints.

    • Assumptions. Assumptions are “a factor in the planning process that is considered to be true, real, or certain, without proof or demonstration” according to the Project Management Body of Knowledge. Assumptions may be a source of risks. Be sure to perform an assumption analysis periodically to validate assumptions.
    • Constraints. A constraint is “a limiting factor that affects the execution of a project, program, portfolio, or process.” Constraints such as a budget or schedule constraints are factual. The project manager must continually consider these defined limits when managing risks, particularly when planning risk responses.
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