Why Risk Management is Vital to Project Success
Many cities in the United States have been disrupted by natural disasters lately. Among these were the devastating fires that impacted the Napa Valley region of California and hurricanes Harvey and Irma that hit Texas and Florida. These events took a devastating impact on people and businesses alike, resulting in human suffering and economic damage. I know of some companies that lost power to their servers and sustained damage to facilities as a result of hurricane Irma. It is not possible to prevent a hurricane; however, it is possible to prevent the impact of a hurricane on a business. I recently wrote a brief article on how PSA managed to avoid serious disruption and protected its infrastructure from the devastating effects of Irma.
The main conclusion reached was RISK MANAGEMENT IS EVERYTHING; the same is true for projects, as well as for businesses.
Most software engineering projects are risky because of the variety of potential problems that can arise. Team members may get sick, resources that you are depending on turn out to be unavailable, even the weather can throw up roadblocks. Essentially, the following is a list of the most common project risks, identified as:
- Schedule / time-related risks;
- Budget risks;
- Operational risks;
- Technical risks.
Because all these risks are painfully real, it’s critical for Project Managers and other team members to identify, understand, and mitigate risks that might threaten the success of a project. Not being prepared for potential problems can take you and your company towards project failure. According to a recent study on project risk management trends, the average large project runs 45% over budget, 7% over time, and delivers 56% less value than expected.
So what are some steps you can take to reduce or eliminate risks?
Project risks may not always require serious preparation in order to manage them effectively. You can use risk planning to identify potential problems that could cause trouble for your project, analyze how likely they are to occur, take action to prevent the risks you can avoid, and minimize the ones that you can’t. The basic steps in risk management include the following:
- Identify the risk.
For starters, you need to uncover, recognize, and describe risks that might affect your project or its outcomes. In earlier stages, the risks may be easy to eliminate or minimize their impact, but if you leave those unattended, you may just end up in disaster.
2. Analyze the risk.
Once risks are identified you should determine the likelihood and consequence of each risk. The analysis assumes an understanding of the nature of the risk and its potential to affect project goals and objectives.
3. Treat the risk.
During this step, you assess your highest ranked risks and set out a plan to treat or modify these risks to achieve acceptable risk levels. Also, you should assign an owner to be responsible for each particular risk and convert it into actions.
4. Monitor the risk.
The last step will be to actively monitor risks to ensure that everything is going as it should.
Risk management can be tricky, but it should not be neglected. From hurricanes to staff illnesses – everything can have a significant impact on a project’s progress and ultimate performance. Such risks are not fully predictable, but with effective risk management practices, potential disruptions and losses can be mitigated. In fact, organizations that report they always use risk management practices have significantly better project outcomes compared to organizations that do not.
Professional Software Associates, Inc. uses risk management and mitigation and can advise you on the best available techniques and practices to protect your projects. Contact me for details.