Manage project risks early

Risk is everywhere. Crossing the street, changing lanes, going to a baseball game, and digging in the yard are all risky things. Some risks are dismissed, like crossing the road - most drivers pay attention to red lights anyway.

Risks during project implementation are much more complex. There are no signposts on your way, and danger lurks at every turn. You may have to pay for many unexpected situations. However, managing projects with trepidation can be equally harmful because risk and reward are linked. Therefore, risk management is both a discipline and an art -- an art of balance that requires a certain amount of guts from project managers, project teams, and shareholders.

Effective risk management requires the active participation of all project-related personnel, including project team members, senior management, and customers. The project manager is the coordinator and recorder. Organizations must provide a clear process, tools and resources for risk management. Perhaps most importantly, the success of risk management depends on creating a culture that encourages employees to be fair about risk and communicate anytime, anywhere. Through communication, the harm caused to the project by "bad" risks can be mitigated, while those "good" risks that harbor unexpected opportunities receive deeper attention.

Get an early understanding of where the risks lie

Most project managers implement some form of risk management. At the beginning of the project, they will make a list of potential risks and their probability of occurrence, and then proceed with the project. This is a problem for Tim Lister, a member of the internationally renowned consulting firm Cutter Consortium.

Here's what Liszt put it: "Many people identify risks and move forward with projects. But in doing so, they're basically praying to the gods for good luck, not Actively prepare for emergencies, or pay a certain price, and take some actions to avoid the damage caused by the risk to the project. This cost is insignificant compared to the loss caused to the project after the problem occurs."

Problems often arise first with the budget, as project sponsors underestimate the importance of risk management and underinvest in risk control. "The lack of budget is one of the reasons why many projects are delayed in completion or deliver less than originally required," Lister said. "We manage the given activities in the project well, but we deal with the problems that may arise. Not enough. I've never seen a project that goes exactly as planned, and there's always something unexpected."

Dr. David Hulett, a risk consultant and principal at Hulett & Associates, points out, Even with limited funding, project managers should provide relevant documentation to demonstrate that the risks they identified do exist. "Many project plans are forced into the hands of project managers by customers or senior management who want to get the project done faster with less money, or want the project to be functionally unusual," Hewlett said. More. If you are forced to take over such a whimsical project, you should use various methods and tools to identify risks and judge what the more realistic goals of the project are."

By collecting Project managers can save themselves from future censure by predicting information about potential risks and estimating the time and money needed to respond to emergencies. Hewlett said: "To realize the value of risk management, you have to do it at the beginning of the project implementation. If the project is in the deep stage, the risk management is not very meaningful. If you understand the risk early where you are, you can prioritize work and reduce some of the risk by re-planning the project. Even if you can't do either of those things, at least you can provide the project sponsor or client with accurate information."

Identifying opportunities that accompany risk

Successful project-oriented organizations understand that risk management is as important as schedule, budget, and scope management. They know that unresolved risks can threaten the smooth implementation of a project, and they know that many risks have potential benefits that can help you achieve results beyond your expectations.

Lister said: "Real risk management requires the full participation of shareholders and customers. They must be willing to participate in the identification and discussion of risk, and be willing to change the original plan or product definition in order to adjust the risk. "

However, customers don't like risk, or at least don't want to talk about it. Because they see uncertainty as a negative thing. Given this, risk experts agree that risk discussions should be conducted in a different way, which is important for risk management.

Hal Mooz, an investor in the Center for Systems Management, a project management consultancy, said: "Risk and opportunity go hand in hand, and no matter what kind of opportunity you pursue, you have to demonstrate that you The residual risk of this is worth it. For example, when people stand on a bungee tower, they need to make the decision that the thrill of bungee jumping is worth their death."

The same is true of the risk and opportunity of the project a relationship. However, many risk models ignore the positive side of the risk-opportunity equation. "The most they do is rank risks by their probability of occurrence and their impact, and they ignore the benefits of opportunities," Muzi said. "To assess risk, you have to consider the opportunities that exist alongside it." benefits."

As project managers identify risks, they are also diligent in providing risk solutions to shareholders, showing them the opportunities that risk presents. "Opportunities often manifest themselves in projects," Muzi said. "But the core opportunity is also the ultimate goal: delighting the customer. As you seek solutions to risk, you will find more tactical opportunities that will bring With new risks, you have to decide where to go based on a variety of reliable information."

When making these decisions, you have to take the customer's feelings into account—unless the results are obvious. Muzi added: "Project managers need to be acutely aware of where customers will not be fussing, and you need to understand them."

Building an Infrastructure for Risk

In a sense, optimal risk management is an innovative move. The collection, analysis, and identification of data is a must, but you will only be rewarded when the project can take advantage of the opportunities that come with risk. Most organizations face the enormous challenge of creating an infrastructure that encourages creative risk management.

Christoph Loch, professor of technology management at INSEAD's Singapore campus, said: "Companies that do well in this area will invest more resources in planning, but that does not mean that The plan will be executed to the end. They are just thinking about as many things as possible in the process of planning, in preparation for solving new problems that arise during the implementation of the project."

Unfortunately, many organizations regard risk as a hot potato . Hewlett said: "Many companies have bad advice. Senior management will say to the project manager: 'The project you predicted from a professional point of view is too long, we must shorten the process, otherwise we will not win the bid.' Managers of these businesses are reluctant to hear bad news."

In such an environment, shareholders often get worse news later in life. To avoid such surprises, the project steering committee or senior management should set a different tone for the project manager and his team.

Loch says, "If you were to tell a great project manager that the only important thing he had to do was achieve his goals, his only rational response to that was to give himself plenty of buffers. Space, just enough to hit the mark."

Lister said: "I often hear people say: 'This is what we need right now, and I'm going to get it done no matter how much risk you take!' This is a training car. However, less than half of the cars tend to make it to the Indy 500 (the oldest racing event in North America). I think the probability of finishing the program should be higher than the probability that the Indy cars will complete the course."

Lack of trust is another major "roadblock" preventing companies from improving risk management. "When a project manager admits to senior management that he may have to redefine it in the middle of a project, senior management often feels uncomfortable," Loch said. "It's a fundamental lack of trust. Senior management feels that once they lose control of the project, they will Terrible things are happening."

In innovative projects, many things are unknown, and the only way to grasp this uncertainty is to constantly redefine the project, and to embed this redefinition deeply into the in the project infrastructure. "The oversight of the project is still there, but the standards of execution are slightly different than before," Loch said. "You can't plan the final outcome of the project, you can only plan the milestones you're going to achieve as the project progresses. You What needs to be monitored is not progress towards goals, but what you learn along the way."

Encourage discussion of risk

According to Lister, risk management is essentially a conversation. "You and your partner and your shareholders have a lot to weigh," Lister said: 'These things could happen, do we take action now? Change the original project plans or carry out these plans as usual?'"

However, even if the conversation is difficult due to political conditions, resource constraints, or the infrastructure for project execution, the project manager should continue to make every effort to ensure that the team has a discussion. "I know an experienced project manager who said to his team, 'I know things can be good, bad, and they can be out of control, but whatever, I need to know what's going on right now,' Hewlett said. If we don't know where we are now, we can't be sure where we're going next.'"

Lister points out that once project team members are confident they can talk openly about risks without fear of being caught As complainers, most of them do so eagerly. "They're not risk-averse people, they're able to talk about the risks to project success and feel comfortable," he said. "But they are deeply concerned that when they see risks that threaten project success, organizations and customers are not If you don't see it, act as if the project is safe."

Five ways to improve risk management

Experts believe that the following five points are critical to improving risk management: learning from experience, thinking for win-win , using tools, mining data, one-by-one processing methods.

Lessons learned. "Lessons are essential to mitigating risk," Muzi said. "When planning a project, the lessons learned document is often placed at the end of the project document, but it should be at the top because it helps Drafting project requirements with project staff."

A win-win mindset. Professor Loch pointed out that there are many guidelines on risk, but not on redefining projects and project ambiguity. The result is that in terms of risk, the relationship between the parties working together on the project has morphed into a life-and-death win-lose relationship. "You need to give the project governance structure some flexibility to discover new win-win relationships in the event of the unexpected," says Loch.

Leverage tools. "Nobody asks a project manager to do calculus," Lister said. "But if you can use the tools you'd use in a Monte Carlo simulation and come up with all the possible outcomes, That's a good thing. Because that's just a tool you use, not your opinion. That way, your opinions are more authoritative."

Digging deeper into the data. "Once you've talked to team members -- not just team leaders -- the data you get is much more reliable," Hewlett said.

A one-for-one approach. "For smaller projects, all you need is a qualitative risk analysis," Hewlett said. "You may only spend an hour a week discussing risk. But for companies operating large projects, there should be a A full-fledged risk officer who understands a variety of risk management tools and has many lessons in risk management."

Originally reprinted with permission from Aaron Smith in Projects@Work Magazine 2003 7/ The August issue of Risk and Reward (http://www.projectsatwork.com), Projects@Work-An IIR Exhibitions US Publication 2003 Registered Copyright. Translated by Liu Yanqun.