Risks in Project! Importance of Risk Management!!–PART 1

 

Hi,

as I promised, in this post I will start to write about Project Risks.

PROJECT RISK IS ALWAYS IN A FUTURE. RISK IS AN UNCERTAIN EVENT OR CONDITION THAT, IF IT OCCURS, HAS AN EFFECT ON AT LEAST ONE PROJECT OBJECTIVE. PROBABILITY THAT RISK WILL OCCUR MUST BE GREATER THAN 0% AND LESS THAN 100%. If it is 100% then that is a FACT, not a RISK!

In my professional career, I have seen a lot of Projects, and I’ve met a lot of different Project Managers. Most of them have never did a RISK MANAGEMENT in their Projects. WHY? Because they thought that they knew EVERYTHING about their Projects, and that a Risk Management is a overhead! They also thought that with Risk Management they will need more money and resources! Money and Resources for the Risk Management is a PART OF PROJECT BUDGET, because with Risk Management you actually SAVE THE MONEY AND THE TIME with preventing or decreasing the damage!!!

I will write about “negative risks” or “threats”. They can hurt your project badly. First what you have to do is to find the Risks! Find them as many as you can! Do not stop when you find, for example 10,20 or 100 risks if you know that there are some more of them!!!

Risk factors are:

  • Probability -> the likelihood that risk (threat or opportunity) will occur
  • Impact -> the effect on the project if risk (threat or opportunity) occurs
  • Expected time -> when during the project the risk (threat or opportunity) might occur
  • Frequency -> how many times the risk (threat or opportunity) might occur during the project

Are the people related to your project the only ones able to identify risks in the project? The answer is NO!!!

Suppose that you have a Project for a “XXX company” and your goal is to deploy a brand-new ERP system. You have friend who had a Project for the same company. The goal of his Project was to paint the walls in the stockroom. He does not know ANYTHING about ERP systems, nor he does know anything about computers at all. Can he help you with your project, in Risk Management?  YES HE CAN. A LOT!!! How? He knows, for example, a lot of people which are stakeholders of your Project. He can give you a valuable information about them, for example, who is a liar (YES, WHO IS A LIAR), who is highly cooperative, and who is not, who often changes his or her mind, and wants always something more, etc.

Another very helpful tool for your Project is Internet. You can find a lot of articles about similar Projects there!

Risk source will tell you “WHERE FROM CAN RISK COME?”. It can be budget, resources, scope, quality, etc. For example, in our “Wedding Project” if you want a glamorous party, but you have only 15.000$ that is Risk, because maybe you will have to cut some scope (like serving the best wines), or you will have to invite only 50 instead of 100 people to your party. 

You also have to clear all assumptions. For example, you assume that you will invite 150 persons to your wedding, and that all of them will came. But what if half of them will not come? 

One of the greatest thing with Risk Management (and Identifying the risks) is so called “Pre Mortem” analysis. BEFORE you start your project ask all of your stakeholders (in a group meeting) the question: “OK. OUR PROJECT HAS FAILED! WHY?”. Then you will hear from your stakeholders what do they think, why should a Project fail, and those are the risks!

One of the common mistake in Process of Risk identification is making the Risk Assessment at the same moment when you find (or identify) the risk. When you identify the risk for your project you should wright it down now matter how “big”, or “small” is it. After you will collect “all” of your risks (ok, ok, I know! You can not collect them all. Collect as much as you can), you will take a next step and that is Qualitative Risk Analysis, and make a risk assessment. I will write about it in my next post. I am on the sea cost, remember? And I became very, VERY LAZY.

For the end of this post I will give you an advice. When you find the risk, describe it in a “cause-risk-effect” form.

Here are two examples:

“Because we have a small budget (The Cause), there is the risk that we will have to hire resources with less experience (The Risk), which can produce a less quality product (The Effect)”

“Because we will serve a spirituous beverages in our wedding (The Cause), there is the risk that someone will get drunk (The Risk), and those people can ruin our party (The Effect)” 

 

All the Best,

Advertisements

About Nenad Trajkovski

Location: Zagreb, Croatia Occupation: Project Manager Interests: Project Management and MS PROJECT He was born in Zagreb, Croatia at 1963. After completing his college he started working on projects in different business areas (banking, manufacturing, automotive industry, distribution, oil companies, etc.) developing and implementing ERP systems into different companies. He has got a lot of experience working with people in different business processes and also possesses great knowledge in information technologies and financial services. Today he works as a business consultant, adn Project Manager in PERPETUUM MOBILE d.o.o. Zagreb. He is a regular lecturer for Project Management in MS Innovation Center in Varaždin, Logosoft Sarajevo in Bosnia and Herzegovina and SEAVUS GROUP in Skopje Macedonia. He was named the best lecturer of WINDAYS 2008 while his lecture was also voted as the best. In addition, he was in TOP 10 lecturers at the MS SINERGY 2009 and MS VISIA 2009, 2010. Shares first place as the best lecturer of KulenDays 2009 and 2010 and PMI Conference 2009 in Zagreb. He is also a regular lecturer in the MS Community. He is a Certified Accountant and a PMP (Project Manager Professional) and a PMI-RMP (Risk Manager Professional), MCP, MCT, and Microsoft Certified Technical Specialist - Microsoft Project 2010. From 01.01.2012 awarded with MVP (Microsoft Most Valuable Proffesional - Microsoft Project)!
This entry was posted in MICROSOFT PROJECT, Microsoft PRoject 2010, MS PROJECT 2010, PMI, PRoject Management and tagged , , , , , . Bookmark the permalink.

One Response to Risks in Project! Importance of Risk Management!!–PART 1

  1. PM Hut says:

    Hi Nenad,

    I think this is a very sweet introduction to risk management. I did publish something similar before. In any case, I would like to republish your article on PM Hut, please either email or contact me through the “Contact Us” form on the PM Hut website in case you’re OK with this.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s