Risk management - Other aspects
Other aspects
Cost and resource
The cost of running a RISK MANAGEMENT PROCESS can be high. The allocation of resource to the risk assessment process will not be uniform. Personnel removed form the project will have an intrinsic value depending on the state of the project at the time. When things are going smoothly the effective cost of the resource is lower than if there is crisis which requires ‘all hands to the wheel’.
Effectiveness of risk management
Culture changeOne of the major benefits of the risk management process is a review of the project management process.
The integration of the risk management process educates companies and individuals and encourages a culture change in the way projects and risks are managed.
In order to realise this benefit, the first occasion to use risk assessment should be chosen carefully. Choose a current project that has been well managed.
As the efficiency of the risk management process improves it may be possible to simplify it in some areas but this needs careful management to make sure of the benefits.
It may be that you focus on the most critical risks, for example, those that may kill the project, risks that can not be off loaded, ones that may cause the contractor to go bankrupt if realised.
The amount of work involved can vary a lot. If you took the view that all risks might not materialise then you may choose not to include any proactive activities in the base plan to mitigate potential impacts; although you may still put effort into generating contingency plans. Conversely, you can draw up a proactive action plan for each of the identified risks in the base plan. There is likely to be a balance in between.
As you move to a more formal system the cost goes up but with expectation of higher rewards.
A more detailed approach will make sure minor risks are not missed. Initially, you may benefit from the input of external consultants and eventually transfer the majority of the risk management responsibility to in-house personnel.
A good risk management process affords confidence for those involved that all the correct questions have been raised and the risk identification process has been as complete as possible.
Modelling
If the modelling procedures are too complex they will be self defeating in that data may be inadequate and personnel may not understand the output and the whole process may become too rigid.
Simplicity will be appreciated by personnel at all levels and will help to create a flexible approach which in turn will deliver empowerment and better project ownership.
More detail may be appropriate in particular circumstances. Confidence may improve by showing that issues have been investigated thoroughly. Estimation may be better and help to clarify decision making options.
Managing the process
The introduction of risk management into an organisation can be a bit of a culture shock. It will require sensitive management or the experience may be seen as a negative one.
Some issues could be:
- Politics can get in the way.
- Previous procedures and documentation don’t fit the system for recording data etc and may require considerable costs to modify.
- The ‘way it has always been done’ a reluctance to change.
- Views of stakeholders.
- There is too much going on and we have no time to introduce it [see 'The Complete Time Management package'].
- Lack of belief to manage the new processes involved.
- Change can only be bad mentality.
The resistance to something new and change is very common. Particular techniques can alleviate this apprehension.
- Good communication
- Training and education
- Involvement in the process
- The quality of help and support
- Certain rewards
It is a good idea to discover what barriers people have to the change and deal with these before introducing rigorous systems.
There is a need to communicate the benefits and a better understanding of the risk management process.
There needs to be sufficient time and resource committed to the process.
Some primary benefits could be:
- The key benefit is the improvement of the project management [see ‘The Complete Project Management package’] and [see 'The Complete Project Management plus PRINCE2'] process not only for one project but across the board.
- The process encourages people to ask the right questions and raise issues that perhaps are difficult to bring to the fore in any other way.
- Documentation of risks and responses will improve.
- You will have a competitive advantage (especially as a contractor).
- Lower costs will mean a better pricing strategy (especially as a contractor).
- You will reduce the chance of taking on a contract that will have excessive problems.
- Early design input will improve the risk management later in the project.
- A better competitive edge will win more contracts.
- Better cost controls will lead to higher profits.
- The movement towards horizon planning is one ‘opportunity’ that will save a lot of effort.
- Businesses move forward and should be aware of changing customer needs and technological advances. The risk management process makes the project manager aware of this and able to cope better.
Introduction of the risk management culture should be carefully managed choosing, initially, a well managed project on which to ‘practice’.
The level of detail in the risk management process will depend upon the type of project and the level of available resources.
The more complex the project the more likely it is that there will be significant benefits from a comprehensive risk management process. Long planning horizons and novel technology may benefit in the same manner.
It is likely that large organisations will have a dedicated risk management team. The process may be driven by either an external or internal consultant.
For smaller companies the existence of a risk management team may be a luxury and responsibility will fall upon an individual.
Try to distinguish between the role of the risk analyst and the project manager whose role is to integrate the overall project and risk management process.
When carrying out a review try to do it as soon as possible while events are fresh in peoples minds. It is useful to draw particular messages from the process that will support future projects.
A review of the risk management process may well be taken by senior management to make sure the process is as efficient as possible.
Over time the make up of the risk management team may need to change and the level of resource put in may need to increase.