Why Project Risk Management Fails
Project risk management can fail for many reasons – faulty assumptions, overlooked events, bias (conscious and subconscious) or a poor schedule foundation. During a recent webinar, Tom Polen, Solution Architect at Deltek, explored the top reasons for failure and provided tips on how to get it right (watch the Why Project Risk Management Fails webinar now).
Risk Management is typically performed after the planning phase, prior to execution. But Tom cautions against performing it as a one-time exercise, recommending instead to continue risk analysis throughout execution, particularly in the early and middle phases. Otherwise the plan can become as obsolete as the original baseline becomes during execution.
And although risk registers are becoming a more prevalent tool to track and address issues, they have limited value when they are not integrated into the project plan or weekly and monthly execution and statusing cycles. By incorporating risk into the schedule, Project Risk Analysis can pinpoint hotspots that may cause delay and determine if your schedule is not achievable.
Some organizations do not bother with risk analysis at all, feeling that they have a plan with risk already built in. But according to Tom, many times the methods they are using are overly optimistic, leading to optimistic outcomes that fail to properly account for risk. He went on to describe these methods, and the pros and cons of each.
Method 1: Risk Loading the Critical Path
Pros. Loading the critical path has some advantages, such as helping the team focus their efforts on a subset of the full schedule. Instead of combing through, for example, a 10,000 line schedule, the critical path may be only 500 lines, making this methodology very efficient.
Cons. This is a dangerous approach if non-critical areas of the schedule suddenly become critical. They would not be addressed because they were not part of the original critical path. This method also doesn’t provide a true picture of risk because not everything is risk-assessed.
Method 2: Creating a Summary Schedule for Risk Analysis
Pros. This method lends itself well to facilitating a risk workshop, either in-person or remote. It is easier for everyone to understand a detailed project plan if it has been summarized. It’s also a simple and convenient way to load and build a risk model.
Cons. Without the details, you won’t be able to identify the impact that risk will have at the granular level. And by design, you will have two separate plans, one at the summary level and another that is the original, detailed project plan. This is not a good position to be in from an audit and executive perspective.
A More Effective Approach – Top Down Categorization
The Top Down Categorization method is superior because it maintains the integrity of the schedule by keeping it whole, while still providing a fast approach. Tom reviewed this method while also demonstrating it in the Deltek Acumen Risk solution.
Integrity is preserved by categorizing the entire original schedule by risk and uncertainty, instead of just looking at the critical path. Then the risk drivers that most impact the schedule and cost can be identified during the full-up assessment. It is important to work with the schedule and cost risk together, so you can assess which cost items get more expensive if they are sensitive to schedule risk.
To learn more about risk management and see a demonstration of it, watch the Why Project Risk Management Fails webinar.
To learn more about Deltek’s PPM solutions click here
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