Why Do Project Risk Management Well?
A few reasons why effective project risk management is both important and beneficial include:
The Down Side of Poorly Performing Project Risk Management
A few reasons why effective project risk management is both
important and beneficial include:
Since the early to mid-1990s, substantial
cuts have occurred in the budget for a number of government organization for
the development and procurement of systems. For example, some government
organizations who traditionally have had large budgets that often increased in
times of need, have, in the last several years, experienced budget cuts causing
the stretchout and even termination of some projects.
Other government organizations and commercial
industry have also been substantially affected. During the 1990s there has been
an overall industry trend towards consolidation and downsizing, which has
sometimes resulted in fewer qualified people and smaller budgets to develop new
projects. This trend is exasperated when coupled with increased shareholder
expectations in the market place (e.g., the need for sustained, high return on
investment). And commercial industry too has recognized that reducing
development cost and time to market are key considerations for profitability,
and even survival.
Given this situation, it is clear that
performance dominated designs may no longer be accepted carte blanche at any
cost and schedule for both government and industry. For example, the DoD and
Services are implementing cost as an independent variable (CAIV)--an initiative
to re-balance the trade space away from a performance dominant position towards
one where cost, performance, schedule, and risk are evaluated (although the
primary emphasis is on cost versus performance).
One result of such trends is an increase
in project risk (cet. par.) and the need for enhanced risk management, both
in terms of a more viable process and one that is more effectively implemented.
For example, NASA management has recognized that their desire for "faster,
better, cheaper" systems makes enhanced risk management a necessity, not
just a "nice to have." On projects where there are strong cost and
schedule constraints, yet high performance requirements, there is typically a
high opportunity cost and little ability to correct mistakes (e.g., dealing
with risks late in the development phase that should have been identified much
earlier). While enhanced risk management is desirable for a wide variety of
projects to better allocate scarce resources, it is particularly important for
high performance projects where large, adverse impacts can occur.
When done properly, risk management can be a
key process which can provide valuable project insight. But this requires that
typically separate cost, performance (technical) and schedule risk management
activities be effectively performed and integrated. It also requires that risk
management be effectively integrated with other key top-level project processes
(project management and systems engineering), and lower-level processes (e.g.,
cost analysis, design, and schedule analysis to name a few) to be effective.
And a fundamental shift in the attitude of both project management from
reactive problem solvers to proactive risk managers. Likewise, risk management
should be considered by working level project personnel on a day-to-day basis
as part of their job function. This does not suggest that everyone should
become a risk manager, but that risk management should be considered and
performed by all project personnel. Unless these and other considerations
are properly executed, the value of risk management performed on a project will
be substantially reduced.
The Down Side of Poorly Performing Project Risk Management
When not performed or performed poorly, the
opportunity cost associated with risk management can be huge--and in some cases
can even be the difference between project termination and success.
Since risk management has now taken on the
status of a "buzz word," consultants and products abound that offer
unsubstantiated claims, and whose knowledge may be highly erroneous or 10 or
more years behind the state of the art. For example, a risk management
consultant recently developed a white paper on risk analysis. Remarkably, 14 technical
errors were identified and documented in this three page paper! In other cases,
risk management consultants and trainers are nothing more than "chart
readers" (using other people's material but not understanding it)--who
have never performed risk management on an actual project, or had long-term
accountability and responsibility to "make it work." Are you willing
to trust the future of your project to someone with erroneous or antiquated
knowledge or no real experience?
We have accurate, state of
the art knowledge and experience to bring effective risk management to your
project! Please contact us to discuss how we can assist you on your project.
|
Links to Project Risk Management Services |
||
|
Why Do It Well? |
||
|
Second Edition of Dr. Conrow's Risk Management Book with Reviews |
||
|
Risk Management e-Interview by International
Council on Systems Engineering |
||
|
Links to Other Services |
||
This web site owned and operated by:
|
Dr. Edmund H. Conrow, CMC, CPCM, CRM, PMP |
|
Reproduction or any other use of this material is prohibited without written permission. |
This
material is Copyright © 2000-2007 by Edmund H. Conrow, All Rights Reserved
|