To 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."
Many organizations have difficulty allocating these resources, especially when resources are thin and risks haven't yet materialized. The temptation to hope that all will go well can lead some to attempt projects with insufficient reserves for risks. And it can lead others to deny that specific risks can ever occur.
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's 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.
- Audit trail
- If the organization someday decides how particular risk types are to be addressed, the Appendix becomes a useful tool to help project teams bring their projects into compliance.
- When available resources
can't cover all identified
risks, we sometimes
revise the risks
- To whatever extent organizational politics or intimidation play any role in risk revision or exclusion, the knowledge that revision decisions will be recorded in the Appendix might deter some intimidators or some who abuse political power to achieve their ends.
- Support for organizational learning
- The Appendix could provide useful data for project retrospectives, or even earlier, if trouble does appear during the project's execution.
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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More articles on Project Management:
- Flanking Maneuvers
- Historically, military logistics practice has provided a steady stream of innovations to many fields,
including project management. But project managers can learn even more if we investigate battlefield tactics.
- Nine Project Management Fallacies: IV
- Some of what we "know" about managing projects just isn't so. Understanding these last three
of the nine fallacies of project management helps reduce risk and enhances your ability to complete
- The Risky Role of Hands-On Project Manager
- The hands-on project manager manages the project and performs some of the work, too. There are lots
of excellent hands-on project managers, but the job is inherently risky, and it's loaded with potential
conflicts of interest.
- On the Risk of Undetected Issues: II
- When things go wrong and remain undetected, trouble looms. We continue our efforts, increasing investment
on a path that possibly leads nowhere. Worse, time — that irreplaceable asset — passes.
How can we improve our ability to detect undetected issues?
- Risk Creep: I
- Risk creep is a term that describes the insidious and unrecognized increase in risk that occurs despite
our every effort to mitigate risk or avoid it altogether. What are the dominant sources of risk creep?
Forthcoming issues of Point Lookout
- Coming May 2: Narcissistic Behavior at Work: VII
- Narcissistic behavior at work prevents trusting relationships from developing. It also disrupts existing relationships, and generates toxic conflict. One class of behaviors that's especially threatening to relationships is disregard for the feelings of others. In this part of our series we examine the effects of that disregard. Available here and by RSS on May 2.
- And on May 9: Unethical Coordination
- When an internal department or an external source is charged with managing information about a large project, a conflict of interest can develop. That conflict presents opportunities for unethical behavior. What is the nature of that conflict, and what ethical breaches can occur? Available here and by RSS on May 9.
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- The Power Affect: How We Express Our Personal Power
- Many people who possess real organizational power have a characteristic demeanor. It's the way they project their presence. I call this the power affect. Some people — call them power pretenders — adopt the power affect well before they attain significant organizational power. Unfortunately for their colleagues, and for their organizations, power pretenders can attain organizational power out of proportion to their merit or abilities. Understanding the power affect is therefore important for anyone who aims to attain power, or anyone who works with power pretenders. Read more about this program.