Poor risk management is costly. Project managers are caught off guard by emerging risks. And these risks may turn into issues costing more time and money.
But, it doesn't have to be that way. We can identify risks early. We can assess and prioritize our risks, allowing us to make better use of our limited time.
Let's look at the cost of poor risk management through the life of Tom Whitley. We will discuss his mistakes. Lastly, I'll provide you with a simple project risk management checklist to keep you from making the same mistakes.
The Star Mutual Insurance Company (SMIC) hired Tom Whitley as a project manager to manage information technology projects. Although Tom missed a few deadlines, he implemented most of his projects, though small, on time and under budget in his first year.
Tom was promoted to program manager after only 12 months with the company. He was assigned his first SMIC program, a combination of projects aimed at helping the company achieve a consistent underwriting profit. The program included projects to implement a new imaging system, a new policy administration system, and a new claims system, each led by a different project manager.
Tom pushed the project managers to take action quickly. He wanted to see progress within two to four weeks.
When one of the project managers spoke of identifying, evaluating, and managing risks, Tom cut her short, “We’ll get to the risk management later. I want an agile approach with the minimum process.”
The senior management team praised Tom for the early action. The imaging team had started building workflows. Check. The policy administration team started developing the interface to the claims administration system. Check. The CEO told the board of directors that things were going well for the first two months of the program (or so she thought).
In the third month, significant issues emerged. First, users were continuously changing the requirements for the policy administration system. Second, Tom started having problems with the third-party vendor resources. Third, the test regions were unstable, making it impossible for the testing teams to stay on schedule.
Tom and the project managers were spending more time dealing with issues and less time preparing for upcoming project activities. Things spiraled out of control. Eventually, SMIC replaced Tom as the program manager. The CEO reported the problems to the board and promised to get things back on track. But, it never happened.
After two years of trying to get the applications implemented, the company terminated the program and wrote off $15 million in expenses. SMIC continued missing revenue goals while expenses rose sharply. The CEO was fired after the company was downgraded twice and after four years of underwriting losses.
“Human beings, who are almost unique in having the ability to learn from the experience of others, are also remarkable for their apparent disinclination to do so.” —Douglas Adams
Although this is a fictitious story, many project managers (and companies) fail to use risk management as an effective means of achieving their objectives. If you were leading the next program, what would you do differently? Take note of Tom's mistakes.
How about you? How would you describe the health of your projects? Review one of your projects with this checklist:
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