Risk-y Business

Carl Pritchard writes for www.ework.com – a Ms.Money partner.

Just this past week, I’ve been reminded on three separate occasions of the importance of clearly identifying the true risk “event” associated with projects. While teaching a seminar at the ProjectWorld conference in Boston, it became apparent that some students clearly grasped the importance of identifying risks so that others can interpret and understand them. Others, however, continued to label risks as simply “bad schedule” or “over cost”- without tackling the true nature of what’s driving us to that condition. The second occasion came as I was reviewing a case study on a project that incorporated highly personalized customer-by-customer deliverables. The risk statements were broad and global, including: “We may lose our allocated resources.” For those for whom risk is a first-strike effort, that’s not a great risk statement. In fact, it’s generic. It could apply in virtually any situation. The third occasion came last night as I visited the local library with my son. I was reviewing a book on disasters (as any good risk manager might) and was struck by an article about the 1981 railroad crash in Mansi, India, that claimed 500 lives. A friend of mine had warned me that if I visit India, I need to very seriously consider other transportation than rail because of the crowds.

What do these three have in common? They identify risk. But they don’t do it well. The real test for whether or not a particular risk is identified well is whether or not it is something on which we can take action. Is there something we can do about it? Think about those three risks…

“Bad Schedule”

I can do something about this, but I’m not sure it’s going to be effective. The wafer-like thinness of this particular risk makes it very difficult to identify any focused solution. While I can find ways to expedite the schedule (or to beg for more time), I can’t effectively argue how I might solve the risk since I don’t really know what it is. How do you solve a risk statement like this? Depth, depth and more depth. “There’s a distinct possibility (probability) the schedule may slip by 3 weeks (impact) if the customer doesn’t follow the change control process.” That’s a better risk statement. It gives me the impact, the probability and the specifics. It gives me something to manage.

“We May Lose Our Allocated Resources”

Once again, depth is going to help, but here, we don’t even know the bad thing that will happen to us. Instead, “We may lose Phillip, and as a result fall behind on the code” gives us a far clearer vision of the nature of the problem and the range of potential solutions.

“Try Another Approach”

My friend’s advice didn’t really prepare me for my reading on the Mansi railroad accident. It was a horrific event. The deaths of 500 passengers occurred when an overcrowded Indian rail train was stopped suddenly to avoid a cow on the tracks. I would have had a far different perspective on this risk had my friend advised “They pack people into every nook and cranny of every train over there. And if there’s even a minor accident, it will become major.” This accident did, as the train jumped the rails.

For each of those three events, the risk strategies, the understanding and the clarity grow exponentially when the true nature of the event is defined. Even settling on probability and impact becomes a quicker, easier process.

For us, what’s the lesson learned? Define the risks well, clearly and thoroughly. Make them clear enough that they truly add value and understanding. Without that level of clarity, the ability to manage is lost.

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