Point Lookout: a free weekly publication of Chaco Canyon Consulting
Volume 14, Issue 49;   December 3, 2014: Ten Approaches to Managing Project Risks: III

Ten Approaches to Managing Project Risks: III

by

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.
Phoenix caissons being towed to form a Mulberry harbor off Normandy, June 1944

Phoenix caissons being towed to form a Mulberry harbor off Normandy, June 1944. The Normandy coast has few natural harbors, and for that reason, among others, the German command regarded it as an unlikely site for a landing. They expected an assault at or near one of the harbors on the French coast, which they therefore fortified heavily. Recognizing the high risk of an attack at or near a harbor, the Allies chose to transform that risk into the risks associated with a beach landing. They then dealt with those risks, in part, by engineering artificial harbors, constructed from chains of caissons like those shown here, which they towed from the English coast and sank off the beaches of Normandy. This approach is a clear example of risk transformation. Photo courtesy U.S. Navy Naval History and Heritage Command.

In Part I and Part II, we explored five ineffective strategies and two somewhat more effective strategies for managing risk. In this Part III, we complete our little catalog with three of the more effective strategies.

Transformation
Transformation strategies entail exchanging the risk or risks in question for a different risk or risks. After the transformation, the asset at risk might be different, or it might be imperiled in a different way, or both. For example, if we're traveling from A to B, and two routes are available, Route 1 might be more congested, while Route 2 might be more hazardous. If we take Route 1 we might lose time; if we take Route 2 we might lose the vehicle and its passengers.
Slogan: "That risk vanishes if we use this alternative approach, but then we would have to deal with this other risk instead."
Advantage: If we can't deal with risk event A, but we can deal with risk event B, then we can proceed with confidence if we take an approach in which risk event A cannot occur, but risk event B might.
Danger: Dealing with risk usually entails estimation. Our estimates can be wrong, either because of the errors inherent in estimation, or because we mislead ourselves.
Compensation
In compensation strategies, we arrange that if the risk event occurs, we make up for it somehow.
Slogan: "If we take these steps, then these good things will happen if the risk materializes."
Advantage: In compensation strategies, we
arrange that if the risk event
occurs, we make up
for it somehow
Even if we can't sufficiently limit the probability or size of the loss, we can proceed with confidence, because the net value of the compensation minus the expected value of the loss is acceptable.
Danger: We might be so emotionally committed to proceeding that we overestimate the value of the compensation.
Transfer
In transfer strategies, we arrange to have some other person or organization (the counter party) bear the consequences of the risk. When the transfer is by mutual agreement, the parties usually exchange some resources as well. Purchasing insurance is an example of a risk transfer strategy.
Slogan: "If we do this, then we don't have to deal with that risk. They will."
Advantage: Transferring risk to another party can relieve us of the burden of planning for the risk. The sum of both the resources required for such planning and the expected value of the loss can exceed the cost of transferring the risk.
Danger: The counter party might not be strong enough, or ethical enough, to cover the loss. When counter parties are coerced into accepting the risk, their reliability can be dubious. Be certain that the transfer is real.

Project risk is inherently imprecise, both numerically and conceptually. By far, the greatest risk is the risk of overlooking or misunderstanding a significant risk, including this one. Ironically, I have never seen it mentioned in a risk plan. First in this series  Go to top Top  Next issue: On the Risk of Undetected Issues: I  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? rbrenaPbFxWoYkQCawKeKner@ChacBpfDcSNrPEliNvfBoCanyon.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:

US Space Shuttle LaunchSome Causes of Scope Creep
When we suddenly realize that our project's scope has expanded far beyond its initial boundaries — when we have that how-did-we-ever-get-here feeling — we're experiencing the downside of scope creep. Preventing scope creep starts with understanding how it happens.
Tape recorder AKAI GX-260DResuming Projects: Team Morale
Sometimes we cancel a project because of budgetary constraints. We reallocate its resources and scatter its people, and we tell ourselves that the project is on hold. But resuming is often riskier, more difficult and more expensive than we hoped. Here are some reasons why.
The interior of an Apple store, location unknownPersonnel-Sensitive Risks: I
Some risks and the plans for managing them are personnel-sensitive in the sense that disclosure can harm the enterprise or its people. Since most risk management plans are available to a broad internal audience, personnel-sensitive risks cannot be managed in the customary way. Why not?
The breech plug of one of the nine 16-inch guns of the U.S.S. MissouriMore Limitations of the Eisenhower Matrix
The Eisenhower Matrix is useful for distinguishing which tasks deserve attention and in what order. It helps us by removing perceptual distortion about what matters most. But it can't help as much with some kinds of perceptual distortion.
British mathematician Christopher Zeeman in 2009Missing the Obvious: II
With hindsight, we sometimes recognize that we could have predicted the very thing that just now surprised us. Somehow, we missed the obvious. Why does this happen?

See also Project Management and Problem Solving and Creativity for more related articles.

Forthcoming issues of Point Lookout

A forest pathComing November 14: The Goal Is Not the Path
Sometimes, when reaching a goal is more difficult than we thought at first, instead of searching for another way to get there, we adjust the goal. There are alternatives. Available here and by RSS on November 14.
An informal meeting geometryAnd on November 21: Make Suggestions Privately
Suggesting a better way of doing things can sometimes backfire surprisingly and intensely. Making suggestions privately reduces that risk, but introduces a different risk. Available here and by RSS on November 21.

Coaching services

I offer email and telephone coaching at both corporate and individual rates. Contact Rick for details at rbrenVXFjgsVwdqOpiKyuner@ChacxGfJevakEIDjhWCkoCanyon.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.