Managing
Project Risks (Part 4): A Simple Risk Mitigation Process
by Adele Sommers, Ph.D.
Getting a handle on project risks
is a slippery job, but well worth the effort if you and your
project team desire to sleep more soundly at night. In Part
2 of this series, we identified various risks related to choosing,
estimating, and staffing your projects. In Part
3, we assessed the potential adverse effects of those risks
on the project cost, schedule, quality, and features.
Following assessment, the mitigation
phase involves brainstorming ways to avoid, eliminate, work around,
or otherwise manage each identified risk. This article (Part 4 of
the series) takes you through a simple, four-step risk management
process. The results can help you and your team decide whether
or not to take on a project, and can aid in pinpointing the most
effective risk management techniques to use.
Risk
Assessment Review
In Part 3, we discussed an example
in which your family has approached you about
redecorating your kitchen because your relatives are coming for
a family reunion the week after next. Your family has many items
on its wish list (new paint treatment, resurfacing the
cabinetry, laying new tile, and installing new crown molding). All
of this must be completed in the next two weekends, which gives
you only four days!
Since you dont believe you
have nearly enough time to complete the project, during your risk
assessment, you labeled one of the risks Too Many Features/Too
Little Time. This means the project requirements are too
numerous, too complex, or both, given the time available. This risk
also scored high in terms of its potential negative impact on cost,
schedule, quality, and features.
Mitigating
the Risks Youve Assessed Can You Do It Successfully?
Once you have a list of assessed
risks, you can begin brainstorming a variety of ways to avoid, minimize,
or manage them. This is a quick and simple process for doing so.
1.
Consider whether you can completely avoid or eliminate each risk.
If your risk involves not having
enough time to incorporate certain requested features, is it possible
to agree on removing the features from the requirements list entirely?
Record any ideas for avoiding the risk altogether.
Example. With the kitchen
redecorating job, you might consider these options:
- Radically reduce the number of features; for example, only paint
the walls.
- Push out the schedule significantly. Maybe the relatives can
come next year.
2.
If you can't avoid a risk, brainstorm risk management alternatives.
Alternatives
are ways of mitigating the risk from the simplest ideas to
more sophisticated solutions. For the Features-versus-Time risk,
one strategy could be to negotiate a way to phase in the features
over time. Another might entail engaging more people or resources
to address the features, if feasible. In some situations, you might
even be able to buy insurance to mitigate a risk.
Example. With the kitchen
redecorating job, you could:
- Hire professionals to do the work, if there are any available
on short notice.
- Recruit semi-experienced friends or neighbors to help for the
next 10 days.
- Use faster, simpler techniques and materials (such as stick-on
vinyl tiles).
- Plan to have a second kitchen set up in the backyard BBQ area,
just in case.
3.
Identify your do-nothing and next-to-nothing
alternatives.
These
are the options that would remain available to you if you did not
pursue the project or solution you're considering. Do-nothing
could mean the status quo, for example, and Next-to-nothing
might denote an option that already exists but has been ignored.
These will help you remain clear about whether you must do something,
and what your fallback position is if you cant do anything.
Example. Instead of the kitchen
redecorating job, why not:
- Hold the family reunion somewhere else, such as in a hotel in
another city.
- Forget what the relatives think. Dont worry about the
kitchen because everyone will be too busy visiting to notice!
4.
Give each risk alternative a risk reduction likelihood
score or rating.
If you want to move forward with
the project or solution, but cant find a way to avoid or eliminate
the risk, you can weigh the relative merits of each alternative
you brainstormed in #2 above.
Similar
to the Assessment Phase, you can assign relevant values to each
of your alternatives. In this case, these values represent the likelihood
that each alternative can significantly reduce the negative impact
of the risk on the four key factors: cost, schedule, quality, and
features.
For instance, a High Likelihood
of reducing the impact might be a 9, a Medium Likelihood
a 5, a Low Likelihood a 1, and No
Likelihood a zero, with a different value possible
for each of the four key areas.
By adding up the values for each
alternative, you'll have a rough score for each that indicates which
alternatives seem to be the best candidates for minimizing the risk
the higher the score, the better. You also might consider
whether to combine alternatives. Using two or more together might
help reduce the risk in a complementary way.
Example: Your family wishes
to move ahead with the project with all of the current requirements.
After scoring and comparing the alternatives, it appears that seeking
professionals to do the work might best minimize the risk. If thats
not possible, your family will do the work with simpler materials
and methods and extensive help from friends. Either way, you can
always set up a second kitchen as a contingency plan.
Whats
the Plan?
When you're finished, youll
have a risk management plan consisting of analyzed risks with a
ranked list of alternatives for handling each one. And even if you
decide not to take on the project you are evaluating, you will have
used 20:20 foresight to make that decision instead of the
20:20 hindsight thats usually required to find out the hard
way after the fact!
To download the related worksheet, click here.
~~~~~~~~~~~
About the Author
Adele Sommers, Ph.D. is author of Straight Talk
on Boosting Business Performance: 12 Ways to Profit from Hidden
Potential. To learn more about her book and sign up for more
free tips like these, visit her site at www.LearnShareProsper.com
This article may be distributed freely on your Web
site, as long as this entire article, including the links and full
About the Author section, are unchanged. Please send
a copy of, or link to, your reprint to Adele@LearnShareProsper.com.
Copyright 2005 Adele Sommers, The Enterprise Prosperity
Guild, All Rights Reserved.
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