Another section from Gary Heerkens’ brief case book entitled “Project Management,” was utilized for much of the material for this article. This section deals with how the project manager and team goes about analyzing risks and managing “high-threat” potential problems during the engagement.
Having analyzed the possible risks to the best of your ability, at this point, you and your project team have identified a substantial list of potential problems. You’ve tried to quantify the extent of these problems and their potential effects on your project. The big picture, though, is that you simply don’t have the resources to deal with every one of these potential problems.
So how do you narrow the list to a manageable size? How do you identify the problems that threaten you the most and therefore demand your attention? There are a number of methods for shortening the list. Should you even shorten the list? That depends on the project and how you want to manage the risks and how you’ve agreed to manage the risks with the customer. If your list is quite extensive, then, yes….it should likely be shortened…but how?
Analyzing the Biggest Threats to Your Project
One of the most common and straightforward methods consists of making subjective judgments about two characteristics of potential problems—probability and impact. These terms mean exactly what you would expect. Probability is the likelihood that the potential problem will occur. Impact is the seriousness or severity of the potential problem in terms of the effect on your project.
Once the probability and seriousness have been identified, determining the high-threat problems becomes a simple issue of ranking based on the two factors.
Taking on the potential high-threat problems will obviously consume resources so it is still critical to determine a threshold at which you will take on the risk or threat and below that threshold you’ll just have to leave it on the list and monitor it as the engagement progresses without taking active mitigation action unless it becomes necessary.
Responding to High-Threat Problems
There are a number of ways to address the high-threat problems you identify. Let’s examine all of the options for dealing with risk and potential problems:
Avoidance
In avoidance, you choose a course of action that eliminates your exposure to the threat. This often means that you’re now pursuing a completely different course from what you’d originally planned. The space shuttle program provides an excellent study in avoidance.
Many flights are carefully planned and then, because of marginal weather conditions, scrubbed. Delaying the takeoff of a space shuttle mission because of a weather threat is a perfect example of risk avoidance.
Transfer
The most widely quoted example of risk transfer is something we’re all very familiar with—insurance. Risk transfer does not “treat” the risk; it simply makes another party responsible for the consequences of the risk.
Assumption
This means that you are aware of the risk, but choose to take no action on it. You’re agreeing to accept its consequences or to simply deal with them if it happens. That’s essentially how you’re treating threats that fall below the threat rating described above. Assumption is also a valid strategy in situations where the consequences of the risk are less costly and/or less traumatic than the effort required to prevent it.
Prevention
Prevention refers to action taken to reduce the probability of occurrence of a potential problem. Ordinarily, it will be your first course of action in dealing with high-threat problems. Prevention begins with identifying the root causes of potential problems. Determining root cause may allow you to identify preventive measures that could reduce the probability that a given problem will occur. Be sure to revise the project plan to incorporate any preventive actions that you intend to take, so that they’re not overlooked or forgotten.
Mitigation of Impact
This strategy aims at reducing the negative effects of a problem. You’re taking measures to lessen the impact. For example, installing air bags in automobiles does nothing to reduce the probability of accidents, but it may significantly reduce the effects. It’s important to note that mitigation tactics may be viewed as a waste of time, money, and effort, if the potential problem does not occur.
Contingency Planning
Contingency plans are specific actions that are to be taken when a potential problem occurs. Although they’re intended to deal with problems only after they’ve occurred, contingency plans should be developed in advance. This helps ensure a coordinated, effective, and timely response. Also, some plans may require backup resources that need to be arranged for in advance. Contingency planning should be done only for the high-threat problems that remain after you’ve taken preventive measures.