Simple Project Risk Management

by admin on February 20, 2009

You will find many definitions of risk management available and I don’t intend adding another. But in a project management context, risk management is a way of managing the uncertainty around your project.

A risk in its simplest form is something that may happen and may have a positive or negative impact. But most people when undertaking risk management focus on negative risks – I guess positive risks are a bonus if they happen. If we accept that things will go wrong on projects (and they do!), it certainly helps to have a structured approach. So in a nutshell, here are the key steps:

Identify your risks. Figure out the things that could have a negative impact on your project. For example “no resources”. Don’t just copy the same risks from your last project risk log - I know some risks will probably be the same across most projects. But spend the time figuring out what could go wrong on this project.

Assess your risks. Here you are capturing some factors against the risks. Typical factors captured are probability (how likely is it to happen) and impact (how big a problem will it be). Some people use 0-100 or high/medium/low. It can also be useful to capture a financial impact if it happens.

Define a response for your risks. This is the fun bit – figuring our how you intend to deal with the risks. Here are the typical risk responses.

  • Avoid the risk. Do something to remove it. In our example above, this may be to reduce the amount of work in the project. Therefore the risk can’t happen as there are plenty of people to do the work.
  • Transfer the risk. I like this one – make it someone else’s problem. So in our example above we could transfer some of the work to a supplier.
  • Mitigate the risk. Do something to lessen the likelihood of it happening or the impact if it happens. So in our example above we get an overtime agreement in place from our resources.
  • Accept the risk. Pretty obvious this one. Do nothing – the risk may have such a small impact it is not worth worrying about.

Most of the above will be captured in a risk log. In you take a look at iPlanWare PPM you will find we have a risk log built into the product which automatically ranks projects by risk level. Far better than using a spreadsheet.

Once you have your risks in place you can then start doing meaningful analysis over your project portfolio. For example which are our most risky projects? What would be the financial impact if the most probable risks happened?

So why do risk management?

  • It is not difficult to do and will have a positive impact on your project outcome.
  • Identifying the most risky projects means you can zone in on those projects at each review cycle.
  • You avoid the “no one told me” culture.
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Increasingly most prospects we speak to are willing to consider our software as a traditional onsite solution (i.e. upfront licensed purchase) or as a hosted service (SaaS / Software-as-a-Service / Online software). For many, hosted software is something new to them and they often like us to summarise the benefits. So here they are:

  • Agility.  You will typically be up and running faster with hosted software than software installed onsite.
  • Scalability. Any decent SaaS vendor should have spare capacity in their infrastructure. They should also be able to add additional capacity very quickly. Meaning if you need to scale it should be a matter of just purchasing additional licenses or subscriptions.
  • Less technical hurdles. Let’s say you work in the marketing department and you want to bring in some project management software. The traditional route would be to have your IT department install and manage it for you. Getting the techs involved to evaluate and install the software will take months. They may not like it, but with SaaS you can often sneak it “under the radar”.
  • Turn the tap on and off. Take our software iPlanWare which aids project portfolio management. Some organisations just need to use our software for a limited time period or need to vary the number of users based on their business cycles and project wins. Our online project management software makes this possible.
  • Up to date software. Whether we like it or not, all software has bugs. With installed software you have to wait for your techs to install periodic upgrades and fixes. With SaaS the vendor will normally manage the upgrade process for you.
  • No upfront spend. SaaS software is typically subscription based so no upfront costs. We are not saying that SaaS will cost you less in the long run - in fact we think the long term costs are pretty much the same as installed software. But you don’t have a big capital outlay upfront.
  • Less risk. Following on from the point above. Buying software is a risk – it may not work as expected, adoption may be poor – any number of problems. Why not test the water. With most SaaS software the minimum commitment is normally a year. If it doesn’t work you have invested a lot less than with an upfront purchase.
  • Doing the deal. Most upfront software purchases come from Capex budgets (Capital Expenditure). Subscriptions for software are normally from Opex (Operational Expenditure). Getting Opex approved is normally easier and quicker. So if you need that software in quickly this alone can make a big difference.
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Over the years we have worked with many organisations across a range of industry sectors. We believe we have identified some common traits that winning organisations display when organising and delivering their projects. Take a look, you may not agree with all. Indeed we may have also missed some. But we are sure organisations that display most of these traits will be the ones who consistently achieve their project goals. Download (.pdf).

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A recent survey found that four out of five project managers see resource management as one of their most important tasks. Yet more than half rely on spreadsheets to perform this important process. Why, when there are software solutions available that will streamline the whole resource planning and resource forecasting process.

Let’s be clear what we mean by resource management:

  • A database of skills and capabilities in the organisation.
  • What capacity (or supply) of resources an organisation has.
  • Visibility of what demands are currently being made on resources.
  • Visibility of what demands are likely to be made on resources in the future.
  • Shortfalls or over supply of resources over time.
  • Understanding what allocations of resources are currently in place.

So as you can see, it is a pretty tricky picture to put together. And one that is difficult and error prone in a spreadsheet based solution. So why not use a tool designed specifically for the job. You can read the full article at Project Manager Today.

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