Point Lookout: a free weekly publication of Chaco Canyon Consulting
Volume 14, Issue 47;   November 19, 2014: Ten Approaches to Managing Project Risks: I

Ten Approaches to Managing Project Risks: I

by

Risk management usually entails coping with losses if they do occur. Here's Part I of a concise summary of the options for managing risk.
Rick Piltz, former senior associate in the U.S. Climate Change Science Program

Rick Piltz (1943-2014), former senior associate in the U.S. Climate Change Science Program in the administration of President George W. Bush. He resigned his position in March, 2005, over political interference in the program. In early June, the New York Times published a story describing how Philip Cooney, chief of staff for the White House Council on Environmental Quality, had revised reports of the Climate Change Science Program to, in effect, sow doubt about the science of climate change. Following publication, Mr. Cooney resigned and accepted a position at ExxonMobil. Mr. Cooney had been engaged in tactics that support risk denial, where the risks in question are the risks associated with climate change.

Photo by Nicky Sundt courtesy GlobalChange.gov.

Discussing risk in general terms is always difficult, because many professions have their own ways of thinking about it. For now, let's regard risk as the chance of losing an asset. We measure the chance as a probability. We measure the asset in units of value.

If the probability of loss in a given time interval is P, and the value of the asset is V, the expected value of loss in that time interval is PV. In a large number of identical trials, our average loss per trial would be PV.

Sound decisions about enterprise resources do consider risk. For example, in estimating a project budget, we might consider the possibility that one of our suppliers might deliver a subsystem three months late. To manage this risk, we might reserve resources to deal with it if it occurs. If the cost of dealing with this event is V, and the probability of it occurring is P, then the reserves required are PV.

That's one example of a strategy for dealing with a risk. Fortunately, it isn't the only strategy available, and in many cases we can do much better. Here's Part I of a summary of the possible strategic options for dealing with risk, emphasizing ineffective (but very common) approaches.

Denial
Those in denial are those who reject the reality of the risk event.
Slogan: "That'll never happen. You're such a worrier!"
Advantage: Denial lets Those in denial are those
who reject the reality
of the risk event
us feel that preparation is unnecessary, because there's no risk. It can be a comforting illusion, especially for those reluctant to allocate resources to managing risk.
Danger: If the risk event occurs, we're unprepared. Worse, we can become disoriented when we find that our view of the world is fiction.
Shock
Shock happens when we're blindsided by the unexpected.
Slogan: "OMG, nobody could've anticipated that."
Advantage: If the unexpected doesn't happen, we can remain in a state of blissful ignorance.
Danger: If the unexpected happens too late for us to take remedial action, disaster is possible.
Acceptance
Acceptance is the strategy for those who don't want to prepare.
Slogan: "That might happen. We'll deal with it then."
Advantage: It requires no advance resource allocation. If the risk event doesn't occur, no resources are expended.
Danger: It can lead us to believe that we have less need for resources than we actually do. Acceptance is a prudent strategy only when PV is very small.
Chaos
This approach happens when we're so distracted by immediate events that we cannot plan for future risks.
Slogan: "Heavens! We've been meaning to plan for that. We clean forgot!"
Advantage: By focusing our resources elsewhere, we do accomplish some tasks. Without a risk plan, allocating resources to risk management becomes unnecessary.
Danger: If risk events arrive before we can allocate resources to risk planning, the risk response can be inadequate, and full-scale disaster is possible.

We'll continue next time with three more risk management strategies.  Next in this series Go to top Top  Next issue: Ten Approaches to Managing Project Risks: II  Next Issue

How to Spot a Troubled Project Before the Trouble StartsProjects 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! .

Your comments are welcome

Would you like to see your comments posted here? rbrenzUOCPCtBIxAPHUbbner@ChacjcpdrDapfHmkuHQvoCanyon.comSend me your comments by email, or by Web form.

About Point Lookout

Thank you for reading this article. I hope you enjoyed it and found it useful, and that you'll consider recommending it to a friend.

Point Lookout is a free weekly email newsletter. Browse the archive of past issues. Subscribe for free.

Support Point Lookout by joining the Friends of Point Lookout, as an individual or as an organization.

Do you face a complex interpersonal situation? Send it in, anonymously if you like, and I'll give you my two cents.

Related articles

More articles on Project Management:

Hurricane Warning flagsDeclaring Condition Red
High-performance teams have customary ways of working together that suit them, their organizations, and their work. But when emergencies happen, operating in business-as-usual mode damages teams — and the relationships between their people — permanently. To avoid this, train for emergencies.
Bottle of poisonToxic Projects
A toxic project is one that harms its organization, its people or its customers. We often think of toxic projects as projects that fail, but even a "successful" project can hurt people or damage the organization — sometimes irreparably.
A section of the Rose Kennedy Greenway in Boston in 2008The Politics of the Critical Path: I
The Critical Path of a project or activity is the sequence of dependent tasks that determine the earliest completion date of the effort. If you're responsible for one of these tasks, you live in a unique political environment.
The Bay of Whales off the Ross Ice Shelf, AntarcticaHow to Make Good Guesses: Strategy
Making good guesses — guessing right — is often regarded as a talent that cannot be taught. Like most things, it probably does take talent to be among the first rank of those who make conjectures. But being in the second rank is pretty good, too, and we can learn how to do that.
Gachi Fernandez and Sergio Cortazzo, professional tango coupleScope Creep, Hot Hands, and the Illusion of Control
Despite our awareness of scope creep's dangerous effects on projects and other efforts, we seem unable to prevent it. Two cognitive biases — the "hot hand fallacy" and "the illusion of control" — might provide explanations.

See also Project Management and Devious Political Tactics for more related articles.

Forthcoming issues of Point Lookout

A shark of unspecified speciesComing 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.
Jump ball in a game of basketballAnd 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.

Coaching services

I offer email and telephone coaching at both corporate and individual rates. Contact Rick for details at rbrenhXWytppcrlTKzIjxner@ChaccOxIvXSYblNwQACGoCanyon.com or (650) 787-6475, or toll-free in the continental US at (866) 378-5470.

Get the ebook!

Past issues of Point Lookout are available in six ebooks:

Reprinting this article

Are you a writer, editor or publisher on deadline? Are you looking for an article that will get people talking and get compliments flying your way? You can have 500 words in your inbox in one hour. License any article from this Web site. More info

Public seminars

The Power Affect: How We Express Our Personal Power
Many The Power Affect: How We Express Personal Powerpeople 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.

Follow Rick

Send email or subscribe to one of my newsletters Follow me at LinkedIn Follow me at Twitter, or share a tweet Follow me at Google+ or share a post Subscribe to RSS feeds Subscribe to RSS feeds
The message of Point Lookout is unique. Help get the message out. Please donate to help keep Point Lookout available for free to everyone.
Technical Debt for Policymakers BlogMy blog, Technical Debt for Policymakers, offers resources, insights, and conversations of interest to policymakers who are concerned with managing technical debt within their organizations. Get the millstone of technical debt off the neck of your organization!
Go For It: Sometimes It's Easier If You RunBad boss, long commute, troubling ethical questions, hateful colleague? Learn what we can do when we love the work but not the job.
303 Tips for Virtual and Global TeamsLearn how to make your virtual global team sing.
101 Tips for Managing ChangeAre you managing a change effort that faces rampant cynicism, passive non-cooperation, or maybe even outright revolt?
101 Tips for Effective MeetingsLearn how to make meetings more productive — and more rare.
Exchange your "personal trade secrets" — the tips, tricks and techniques that make you an ace — with other aces, anonymously. Visit the Library of Personal Trade Secrets.