Ten Approaches to Managing Project Risks: II

We began our catalog of risk management strategies last time, exploring Denial, Shock, Acceptance, and Chaos. None of those four are particularly effective with respect to achieving our goals in the context of adversity. One more ineffective strategy remains to be explored before we examine some more effective approaches.

Procrastination

This strategy, usually executed unconsciously, involves repeated delay of planning to address acknowledged risks. We just can't seem to find time to sit down and plan for risks.

Slogan: "Yes, we have to plan for that risk, but we're too busy right now. Maybe tomorrow."

Advantage: Deferring planning enables the procrastinator to defer acknowledging the cost of managing risk, which can be helpful in persuading decision makers to undertake or continue the effort, because its full cost is unrecognized. Procrastinating also enables the procrastinator to claim that planning is "in progress" when actually it isn't.

Danger: Procrastinating leads to a perception that the resources at hand are sufficient, when they might be wholly inadequate. It can also lead to delays so great that the organization can become unable to prepare for the risk prior to the actual risk event.

Let's look now at strategies that actually facilitate progress.

Avoidance

Avoidance is the choice to eliminate the possibility of loss by changing what you're doing. Other losses might happen, but not that one. For example, if we include an overview of the Marigold project in our presentation, we risk being asked about Issue 18, for which we have no answers yet. To avoid that risk, we decide not to provide a general overview of Marigold. Instead we'll discuss only Issue 17, which is almost resolved.

Slogan: "If we use this other design instead, we can avoid that risk."

Advantage: Finding Sometimes we can be so averse
to risk that we convince ourselves
that a risk-avoiding alternative
approach can achieve our goals,
when it actually cannota clever alternative to what we planned originally, and thereby avoiding a risk we would have borne under the original approach, can be both elegant and effective.

Danger: Sometimes we can be so averse to risk that we convince ourselves that a risk-avoiding alternative approach can achieve our goals, when it actually cannot.

Limitation

Limitation strategies reduce the probability of the risk event occurring, or reduce the size of the loss if it does occur, or both. Using limitation, we make the risk acceptable by reducing the expected value of the loss.

Slogan: "We can reduce the probability of that risk (or the cost of that risk) if we do this."

Advantage: The expected value of the loss associated with a risk event is the product PV, where P is the probability of the occurrence and V is the value lost. If we can reduce the expected value enough, we can proceed with confidence, even if the risk event occurs.

Danger: Estimating probabilities is notoriously difficult. If we're wrong in our estimates, and the risk event occurs, we could be in trouble.

We'll continue next time with the last three of our risk management strategies.   First issue in this series    Next issue in this series   Top    Next Issue

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More articles on Project Management:

Ten Approaches to Managing Project Risks: III

Project risk management strategies are numerous, but these ten strategies are among the most common. Here are the last three of the ten strategies in this little catalog.

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The planning fallacy is a cognitive bias that causes us to underestimate the cost and effort involved in projects large and small. Efforts to limit its effects are more effective when they're guided by interactions with other cognitive biases.

Allocating Action Items

From time to time in meetings we discover tasks that need doing. We call them "action items." And we use our list of open action items as a guide for tracking the work of the group. How we decide who gets what action item can sometimes affect our success.

See also Project Management for more related articles.

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