Seven steps to avoid project risks

It is rare to encounter an item where all parties involved feel that they are in control. Time always seems to be running out, funding and manpower always seeming too low, and there's usually some obscure technical challenge.

Project risks come from many sources. Common risks that you and your team need to be aware of include the following:

Inadequate measures or inaccurate costs and actions result in inaccurate project planning and unmanageable high costs.

Overcrowded schedules Overcrowded deadlines can lead to lower quality, lower morale, increased friction, and even aborted projects.

Mismanaged Project leaders who are skilled at technical work but poor at defining, planning, evaluating, tracking, communicating, and controlling projects can produce poor results and serious inefficiencies.

Variable user requirements Insufficient control over changes, wasting money and manpower and leading to rework.

Project too big Project size itself is a risk. The bigger the project, the more likely it will end in a miscarriage. The largest projects tend to be cancelled after a year or more of the original deadline. At this point, the money spent has at least doubled over the budget, and in most cases there is no salvageable output.

Managing project risk requires a full understanding of the above points in the upfront work in order to set realistic project goals and commitments and expectations. Assessing project risk raises awareness of overall risk, it also reveals many small problems that can be easily eliminated, saving time and making time-critical work a lot easier.

While it is never possible to completely eliminate project risk, it is sufficient to minimize the most serious problems. Once the project is deemed feasible, hard work, and a little inspiration and cleverness are often enough to bridge the gap.

Project risk management consists of 7 steps. These steps constitute a framework for effectively utilizing risk and project data to influence necessary changes, clearly communicating project risks, and adopting continuous risk management practices to promptly detect new risks and minimize problems throughout the project. These steps are as follows:

Complete Documentation

Project teams that do not adequately document their own projects are at greater risk. Furthermore, if you lack data, there is little chance of influencing the project to make necessary changes because your proposals and negotiations do not have enough facts to back them up.

Detailed project documentation gives you the basis for validating the project plan. The ultimate purpose of this step is to establish and document the project plan so that it is in line with the project objectives and is practical.

Project documents are divided into three categories: definition documents, planning documents, and phased project communication documents. Definition documents are usually the first to be prepared, and they include the high-level project review, scope statement, project proposal, project funding, staffing and organizational information, and project methodology. Planning documents, such as the project work breakdown structure and the project resource plan, are also prepared at the earliest stages of the project and are continually supplemented throughout the project as changes are approved and new information becomes available. Phased project communication documents are accumulated throughout the project and include status reports, meeting minutes, and project reviews.

Project files are most useful when they have a consistent, readable format, so you should adopt the appropriate format and stick to it. Find someone responsible for the creation, preservation, and distribution of the file, and determine how and when the file can and should be changed.

Documents are only valuable when they are readily available to those who need them. Storing files online (with appropriate access security controls) is an effective way to ensure that all team members have access to and rely on the same information to do their work.

Improves teamwork

Completing difficult projects requires teamwork, trust, and a willingness among members to help each other. In tense situations, the chain always breaks at the weakest link.

One way to deal with this and minimize risk in situations where project people are unfamiliar with each other is to hold project kick-off workshops. Kick-off workshops are activities designed to increase teamwork and start the project process. A good start-up activity achieves a common understanding of the project's goals and priorities, avoiding wasted time and duplication of effort. It also builds more cohesive teams, allowing projects to start quickly and efficiently.

For small projects, the kickoff meeting may only take half a day. On larger projects, a series of workshops may last a week or more. When working with a global team, allow extra time to adjust to factors such as language and culture.

Project Kickoff Workshops are organized early. Work hard on the details of the agenda, facilitators, information needed, where, when, and who will attend. In discussions and presentations, try to get people to agree on the project goals, priorities, key deliverables, and the roles and responsibilities of team members.

Following the workshop, provide a written summary of the meeting outcomes and decisions to all participants. Incorporate the work done in the workshop into the project document in an appropriate manner. Follow up on all action items and other work tasks developed in the workshop by completing or adding them to the project plan.

Select Metrics

Projects are complex systems, so one metric is often not sufficient to monitor the entire process. Using too few metrics can lead to inappropriate decisions or behavior, while too many metrics can also cause problems. The first is the exorbitant cost and labor of collecting data. Efforts should be made to identify a set of project metrics that align with corporate goals and values.

A useful metric is a goal. Good metrics should also be easy to understand and collect. Be clear about what needs to be measured, how, and discuss through discussions to establish a common understanding of the process. To determine the unit of measure and precision, and use the same unit in all collections, assessments, and reports. For example, you might decide to round the unit of duration estimates to the nearest working day. Also, determine the frequency of measurement. It is necessary to ensure timely collection to support the desired results, but also to prevent unnecessary overhead of collecting data over the frequency band.

Before using a metric, discuss it with all parties affected by the metric and try to get all members of the project team to agree on the definition, the plan for data collection and use, and the meaning of the results. Get a prior commitment from all those who collect and provide data.

Make measurements clearly visible throughout the process. Data is rapidly assessed and reported to ensure timely feedback and early detection of major deviations.

Establishing a Management Reserve

A management reserve is a common term for project risk management, the purpose of which is to reduce uncertainty. Time and budget reserves based on expected risks can make schedules more reliable. Building reserves is not about relaxing estimates or creating multiple alternative schedules to accommodate team procrastination, but using risk assessment information to set appropriate buffers so that the project can deliver on its promise.

Establishing management reserves is based on two elements: known risks and unknown risks. The first element comes from planning data. Unknown risks are risks that cannot be predicted and described. Explicit planning for unknown risks is impossible, but metrics from previous projects can provide guidance on the magnitude of risk.

Use project resource analysis and risk data to determine how much reserves are needed. Budget reserves can be used to expedite work, provide additional resources, or take other actions necessary to secure the schedule.

It can be challenging to focus on budget reserves without using them for project changes that are not risk related. In technology projects, managing budget reserves is often easier than managing schedule reserves because decisions about funding and resources are typically made by project leaders or even higher up in the organization.

Gain explicit support

High-risk projects need all the help you can mobilize, so work to gain and maintain high-priority and visible support for your projects. Especially in high-risk projects, you need a commitment to quickly resolve escalating issues, protect the project team from conflict and non-project commitments, and approve any management reserves required.

The initial discussions for support focus on summaries, so writing a clear, informative summary is critical. When preparing project information for discussion, include high-level goals, milestone project schedules, project evaluations, and a summary of key tasks and risks. If your plan shows that the current project plan does not match the required project goals, you should also have several high-level recommendations describing possible alternatives.

Having data is the key to success, as the balance of power is not in your favor in this type of negotiation. While it is easy for funders and managers to ignore concerns and opinions, it is much harder for them to ignore hard facts. Any project information supported by documented historical data can be a starting point for fact-based objective negotiations.

Confirm Project Plan

After discussion and negotiation, confirm that you agree on the project. Demonstrate that you have a plan acceptable to the grantees, other interested parties, and yourself and the project team that supports the project goals.

Project documents from the planning process with negotiated changes are to be used to establish a project baseline planning record. Before finalizing the plan, it is reviewed to ensure that it includes staged risk reassessment activities throughout the process. During these reviews, additional risks are identified and contingency plans are updated.

Publish the final project documents and distribute them so that the project team can access and use them throughout the project to manage progress. If possible, put project files online so that everyone has access to the latest version at all times.

When setting the project baseline, fix any specific requirements. To set the project scope and baseline plan at the same time, the established change process must be used to make changes to both.

To make risks clearly visible, create a "top ten" list of known significant risks for the current project phase and post it where the team can see it. Consistently review and update regularly throughout the project.

Clarify Change Control Procedures

Once the project plan is accepted and specific requirements are fixed, all changes are carefully considered before finalization. After decision makers have signed off on the project documents, it is very risky to allow unaudited changes to the project. While new information always flows around technical projects, maintaining the stability of requirements is critical to project success.

Unmanaged changes can lead to schedule drift and budget issues. Every change is subject to a submission, analysis and processing process to reduce risk. In an effective change management process, all changes are considered unnecessary unless proven necessary.

Another requirement for effective change control is to ensure that those responsible for the change process have the authority to enforce their own decisions. Change reviewers must be sufficiently involved in the project to effectively understand the positive and negative impacts that the change may have.

Information is at the heart of successful project management. Knowledge of the job and potential risks is the first and best means of preventing problems and project delays. An overall assessment of project risk provides sufficient justification for necessary changes in project objectives and is therefore one of the most powerful tools for protecting difficult projects from failure.

Project risk increases when resources are insufficient or schedules are tight, and knowledge of project risk is required to properly set expectations for project outcomes and required work.

Original text excerpted with permission from Identifying and Managing Project Risks, copyright 2003 by Tom Kendrick. Published by AMACOM, an affiliate of the American Management Association. Translated by Lian Qingsong. The English version of the book is available through McGraw-Hill Education (Asia) in Singapore.

Tom Kendrick has over 25 years of project management experience. For 12 of those years, he worked on Hewlett Packard Enterprise project management initiatives, managing a wide range of engineering, information technology, and networking projects.