Project Risk Management 101

Risk is a future event that may have an impact on schedule, cost or scope.  It may happen or it may not.

Image Courtesy: Open Security Architecture

While Issue is a condition or problem already occurred (or will occur for sure) that impacts schedule, cost or scope.

When Risk is realized, it becomes an issue.  It should be handled accordingly using the money set aside called Management Reserve.  A governance process is usually established to authorize the use of Management Reserve.

Risk and Issues are recorded into Risk and Issue Logs (sometimes Excel spreadsheets).  Risks are identified prior to project startup and through out the project life-cycle.  Risks are communicated to Stakeholders.  Risks when recorded should be worded such that sentences are complete and specific identifying area of impact with its  probability. Issues are prioritized and assigned.  Assigned person develops the action plan to resolve the issue.

Risk must always be assigned to someone, with a target resolution date.  Assigned person has responsibility to provide mitigation/contingency plans on how to handle Risk, if it realizes.

Severity  determines how to react to the Risk.  It can be calculated:
Severity = Probability of occurring Risk x Impact on the Project
Probability and Impact are measured in High, Medium and Low.

Mitigation plan is proactive approach; it is focused on how to mitigate or reduce the severity.  You need mitigation plan for any risk that has severity either medium or high.

Contingency plan is relative approach; it is set of predefined/contingent actions that team will take if Risk event occurs.  For any risk with high severity, you must provide contingency plan.

Four ways to handle Risks – Watch, Accept, Transfer and Mitigate.

  1. Watch – Just keep an eye (monitor regularly) the Risk but no action.
  2. Accept – Accepting the full impact  and plan accordingly
  3. Transfer – Divert the impact to another party
  4. Mitigate – Plan on how can the impact be lessened on project

Action Plan is a plan of documented actions developed in order to resolve an issue that is adversely impacting the project.  Action steps should be clear and identify outcome and deliverables from the action.

Project Manager‘s responsibility is to review the feasibility of mitigation, contingency and action plans.  Then approval is sought for the plan from governance board and then communicated to the stakeholders.  Project work plan is updated to reflect these approved risk management related changes.

Closing Risk is little tricky, mostly when risk is realized it becomes issue and risk is appropriately closed.  You need to check if this risk could re-occur?  If yes, then keep risk open and review budget for management reserve amount.  Closing issue needs confirmation that issue is resolved.  A sign-off note from customer or impacted stakeholder is also required.

Note – These are some key points that I captured sometime ago during Risk Management Refresher, hope it will help

Elected President of the Chapter

I am extremely pleased by the confidence that Board has expressed in me to take PMI-GLC to next level of volunteer and stakeholder engagement, trusting me with opportunity to formulate and lead operational vision, strategy and direction while working on to provide higher membership. 

Last night at Skyline Club in the board meeting, I was elected president for 2012 term by Board of Directors of Great Lakes Chapter of Project Management Institute (PMI – GLC), one of the largest project management member association in Michigan.   I will serve as President Elect for 2011.  I have been involved with the chapter earlier as Direct of Webservices and then as Vice President of Communications.

I look forward to enhancing our strategic relationships with organization and businesses leaders to highlight the importance and benefits of Project Management and role PMI-GLC plays in the region.  I hope to engage more stakeholders to broaden our network of practitioners, while continuing to support a passionate and dedicated volunteer community.

I would encourage all professionals to get involved in their community or professional organizations, it benefits both, the volunteer and the community/organization.  And, if you are a professional living/working  in Michigan or Metro Detroit area, please get in touch with PMI-GLC at www.pmiglc.org.  Let find out how can we make project and program management work for your community, organization or for you.

Salience Model – Stakeholder Analysis

Who is a stakeholder? Simply anyone with a stake in the project either direct or indirect.   

PMBOK says that stakeholders for a project are persons or organizations  –  

  • who are actively involved;
  • whose interests may be positively or negatively affected by the performance or completion of it.
Stakeholder analysis is a process of systematically gathering and analyzing qualitative information to determine whose interests should be taken into account when developing and/or implementing a policy or program. 
Remember that more complex your project is, more attention you need to pay in managing stakeholders. You can do all the right things for a project, but mismanaging a stakeholder who has power, influence and interest can cause failure of the project.

Mitchell, Agle and Wood (1997-99) have come up with stakeholder analysis model, that can help a project manager in early phase of planning process to identify stakeholder and classify according to three major attributes – 

  1. Power – to influence the organization or project deliverables (coercive, financial or material, brand or image);
  2. Legitimacy – of the relationship & actions in terms of desirability, properness or appropriateness;
  3. Urgency – of the requirements in terms of criticality & time sensitivity for the stakeholder.

Based on the combination of these attributes, priority is assigned to the stakeholder. 

Level 3
(High Priority)
7 – Definitive
Power, Legitimacy & Urgency
Level 2
(Medium Priority)
4 – Dominant
Power & Legitimacy
5 – Dangerous
Power & Urgency
6 – Dependent
Legitimacy & Urgency
Level 1
(Low Priority)
1 – Dormant
Power
2 – Discretionary
Legitimacy
3 – Demanding
Urgency

 

 Keep in mind that  –  

  • These three attributes can be gained or lost during the time period of the project, so pay attention when it happens. 
  • Level 1 (Low Priority) stakeholders can increase their salience by coalition building, politics, or media influence.
  • Power alone is insufficient to classify a stakeholder high priority; but some times it does, for example – CEO’s favorite project.
  • Stakeholder analysis requires careful planning, standard guidelines for selection of stakeholders, resourceful team members who have background information, and standard set of questions that feed into the worksheet.

More resouces on stakeholder analysis are at  –  

 References – 

  1. PMBOK Guide- 4th edition, PMI. 2008
  2. Schmeer, Kammi. 1999. Guidelines for Conducting a Stakeholder Analysis. November 1999