| May 28, 2008 | Volume 8, Issue 22 |
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by Rick Brenner
Prudent risk management begins by accepting the possibility that unpleasant events might actually happen. But when organizations try to achieve goals that are a bit out of reach, they're often tempted to stretch resources by revising or denying risks. Here's a tactic for managing risk revision.
o manage risks properly, we must allocate resources to implement a risk management plan. Some resources must be allocated in advance of anticipated risk events, and some must be held in reserve "just in case."
Back in 2001, the exposure of New Orleans to hurricane risk was so well known that it was the subject of a superb article in Scientific American (See M. Fischetti, Drowning New Orleans). Moreover, the storm's effects on the bridges were entirely predictable — explaining them entailed no new engineering discoveries. One can easily speculate about how the outcome of Katrina might have differed if resources for risk study and mitigation had been made available, but one also wonders what disasters elsewhere are yet preventable. Photo by Commander Mark Moran, Lt. Phil Eastman and Lt. Dave Demers, NOAA. Courtesy U.S. National Oceanic and Atmospheric Administration.
For example, despite decades of widely accepted predictions, the U.S. government failed to provide adequate resources to New Orleans for hurricane-induced flood risk mitigation and planning.
In the project environment, at best, project managers or risk officers identify risks and propose resources to mitigate them. Project sponsors and organizational management then review these proposals for sufficiency and reasonableness. They negotiate with the project staff as necessary, and then they allocate appropriate resources for risk mitigation and management.
In many organizations, things rarely work that way. Organizations commit themselves to risk plans that amount to little more than naïve hopes and wishes for the best. How does this happen?
In some cases, the available resources cannot cover all identified risks unless everything breaks favorably. When someone identifies a risk that is expensive to manage, risk revision, exclusion or denial enables those involved to commit to the effort despite resource shortages. When this happens, risks that do materialize can threaten the project — or worse, threaten the enterprise.
What can organizations do to manage risk revision?
One approach involves adding to the project plan an Appendix of Revised or Excluded Risks — risks that someone proposed, but which were edited before inclusion in the risk plan, or excluded altogether. For each revised risk, the appendix includes the original proposed risk, a revision history with dates, the arguments in favor of and against such revisions, and the names of all involved in each revision decision. The Appendix of Revised or Excluded Risks serves several purposes.
If you think risk revision and denial aren't happening in your organization, you might want to add that observation to your Appendix of Revised or Excluded Risks. 
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Projects never go quite as planned. We expect that, but we don't expect disaster. How can we get better at spotting disaster when there's still time to prevent it? How to Spot a Troubled Project Before the Trouble Starts is filled with tips for executives, senior managers, managers of project managers, and sponsors of projects in project-oriented organizations. It helps readers learn the subtle cues that indicate that a project is at risk for wreckage in time to do something about it. It's an ebook, but it's about 15% larger than "Who Moved My Cheese?" Just USD 19.95. Order Now! .
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