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 . Order Now! .
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More articles on Project Management:
- The Cheapest Way to Run a Project Is with Enough Resources
- Cost reduction is so common that nearly every project plan today should include budget and schedule
for several rounds of reductions. Whenever we cut costs, we risk cutting too much, so it pays to ask,
"If we do cut too much, what are the consequences?"
- The Injured Teammate: II
- You're a team lead, and one of the team members is suddenly very ill or has been severely injured. How
do you handle it? Here are some suggestions for breaking the news to the team.
- Durable Agreements
- People at work often make agreements in which they commit to cooperate — to share resources, to
assist each other, or not to harm each other. Some agreements work. Some don't. What makes agreements durable?
- Design Errors and Group Biases
- Design errors can cause unwanted outcomes, but they can also lead to welcome surprises. The causes of
many design errors are fundamental attributes of the way groups function. Here is Part II of our exploration.
- False Summits: I
- Mountaineers often experience "false summits," when just as they thought they were nearing
the summit, it turns out that there is much more climbing to do. So it is in project work.
Forthcoming issues of Point Lookout
- Coming January 22: Disjoint Awareness: Bias
- Some cognitive biases can cause people in collaborations to have inaccurate understandings of what each other is doing. Confirmation bias and self-serving bias are two examples of cognitive biases that can contribute to disjoint awareness in some situations. Available here and by RSS on January 22.
- And on January 29: Higher-Velocity Problem Definition
- Typical approaches to shortening time-to-market for new products usually involve accelerating problem solving. Accelerating problem definition can also help. Available here and by RSS on January 29.
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