Weighing the Risks

Co-written with Brian McHugh

Slalom Consultant Carl Manello

Carl Manello is a Solution Lead for Program & Project Management based in Chicago who enjoys exploring how to tightly couple the art and science of project delivery with business operations.

“First weigh the considerations, then take the risks.”
–Helmuth von Moltke (1800-1891), regarded as one of the great strategists of the latter 19th century

Most projects don’t require the great mind of a military strategist. However, they do require a strategy for approaching, defining, and managing risks. This begs the question “is risk planning really worth it?”

Clients often want PM’s to focus on tasks perceived to have more tangible results and more definite outcomes than risk planning. Leaders sometimes think they already know the project risks and that any risk planning done by PM’s simply restates what is already known. Collectively, stakeholders may know all the risks. The problem is that not all the stakeholders know all the risks. Therefore, the challenge for PM’s is to get risks out of stakeholders’ minds, to get them documented and to manage them effectively. Some clients fear risk planning as a long and involved process that may not yield much benefit to the project. At Slalom, we have found the opposite to be the truth. Like all aspects of Project Management, a tailored approach to risk planning yields the best results and will help to put your leaders at ease. There are three main steps to risk planning and each can be tailored to fit your project:

Slalom Consultant Brian Mchugh

Brian McHugh is a Management Consultant in the Chicago office focusing on program and project Management and specializing in managing complex projects and programs that drive business value. Brian loves helping his clients “get it done!”

  • Identifying risks;
  • Determining the probability and impact of risks; and
  • Performing detailed analysis for major risks.

Risk Identification
In her book Risk Management: Tricks of the Trade, Rita Mulcahy identifies the following methods for risk identification:

  • Review past documentation from similar projects;
  • Interview SMEs from other, similar projects;
  • Hold brainstorming sessions to elicit risks; and
  • Send a form to stakeholders to fill out with any risks they foresee.

Ms. Mulcahy suggests that combining several of these methods will lead to identifying the most risks. This is where tailoring comes in. It may be ideal to use several of these methods, but if your sponsor has not fully bought in to risk planning, you may need to pick only one method. If so, pick the method that is most appropriate based on your situation. Once your sponsor sees the progress you are making at uncovering risks (especially risks he/she did not think of), you might want to layer additional methods on top of the original. When eliciting risks, seed the discussion with common risks such as resource availability or the risk of using a new product or technology. Suggesting some starter risks may help to get your stakeholders thinking about risk and will facilitate the identification of as many risks as possible.

Determining Probability
Once you have risks identified, you are able to determine the probability and impact of each risk. This can be viewed as a high-level assessment of the probability and impact. The assessment should be a rating (i.e., 1-5 or 1-10 scale) of each risk. In addition, the assessment should include the impact of each risk if it occurs. The assessment can be done by facilitating stakeholders through a session or by distributing a form to each stakeholder for them to rate the probability and impact of each risk. Slalom has found that the best method is to facilitate a session with primary stakeholders and distribute a form to secondary stakeholders. Often times, teams will want you to take an approach based on budget or schedule constraints. If you are able to use only one approach, pick the method that will be most effective given your culture.

Risk Analysis
The final step in risk planning is to create detailed plans for risks. An analysis of the risk will include a percentage probability for the risk occurring and the budget impact of the risk if it occurs. You can work with subject matter experts to establish these details. Typical risk models multiply the probability by the impact which yields a risk score. The risk score enables you to rank each of the risks and it will tell you where to focus your PM efforts.

PM’s must learn to scrutinize the results of the risk scores. For example, if a stakeholder indicates that there is a high probability that hardware won’t be ready when needed because of the length of time hardware requests take to get approved, determine how to reduce that probability of risk. Your team could talk to the person responsible for procuring hardware to see if your hardware purchase can be expedited. With updated information in hand, go back to your stakeholder and determine if he or she is comfortable reducing the probability based on the new information. This is where risk planning provides tangible results. Lowering the probability of a risk occurring lowers the overall risk of the project and can help lower contingency budgets.

There are volumes written about the strategy for risk management. But as Sir Winston Churchill stated, “However beautiful the strategy, you should occasionally look at the results.” Measure your success, tailor your approach, refine your methods, and continue to improve. Risk is about knowing where to focus your attention. So follow the advice: weigh the considerations and then take the risks.

Slalom Consulting’s Chicago office Slalom Consulting's Project & Program Management focus
Learn more about our Chicago office Learn more about Slalom Consulting Project Management

subscribe by emailSubscribe to follow new Project Management posts

About Carl M. Manello
I am Slalom Consulting's Practice Lead for Delivery Effectiveness. I work to support organizations' capability and delivery maturity -- not just IT organizations -- so that their initiatives run more predictably, efficiently and provide the best results.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: