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.
- Deterrence
- 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.
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. Top Next Issue
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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Related articles
More articles on Project Management:
- The Injured Teammate: I
- You're a team lead, and one of the team members is very ill or has been severely injured. How do you
handle it? How do you break the news? What does the team need? What do you need?
- Wishful Thinking and Perception: II
- Continuing our exploration of causes of wishful thinking and what we can do about it, here's Part II
of a little catalog of ways our preferences and wishes affect our perceptions.
- The Risks of Too Many Projects: I
- Some organizations try to run too many development projects at once. Whether developing new offerings,
or working to improve the organization itself, taking on too many projects can defocus the organization
and depress performance.
- More Obstacles to Finding the Reasons Why
- Retrospectives — also known as lessons learned exercises or after-action reviews — sometimes
miss important insights. Here are some additions to our growing catalog of obstacles to learning.
- Ten-Minute Training
- Despite decades of evolution of technology-assisted workplace learning, instructor-led classroom formats
remain the most popular and effective. Now perhaps videoconferencing can help to achieve that effectiveness
at lower cost.
See also Project Management and Project Management for more related articles.
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