Is it Luck, or Good Risk Management?
March 20, 2015 by Lynn Faughey
As we approach St. Patrick’s Day, I’ve been seeing a lot of articles and blogs about the topic of luck. In fact, I’ve often been told how lucky I am and although I’ve never won the lottery or hit it big at the casinos, I have been very fortunate in my life. But it’s made me wonder, is it really luck or just hard work and good risk management? There seems to be an increased focus on this topic lately. Colleges now have majors in Risk Management. Consulting companies, like Accenture and Deloitte, have areas of practice focused strictly on Risk Management and many large companies have entire Risk Management departments.
So what exactly is risk management? Per Wikipedia…Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. Risk management’s objective is to assure uncertainty does not deviate the endeavor from the business goals.
As project managers, one of our most important responsibilities is managing risk on our projects. Risk assessment must be built in, right from the beginning of the project, so that if things go wrong the main objectives and goals are still achieved – on time and on budget. As much as we’d like to, we can’t expect things to go always go as planned. It’s important to be realistic and to proactively build in a contingency in case the project goes off course. Assessing the risks that are most likely to occur, the severity, and the probability that they will occur, is a critical component to any project plan. Being pro-active regarding managing project risk and communicating it across the team is essential to any project’s success. Being reactive in this regard is a recipe for disaster.
I recently read an interesting article written by Bart Jutte who is a founder and consultant at Concilio, an NL based company specializing in project risk management. In his article titled, “10 Golden Rules of Project Risk Management”, he illustrates the importance of imbedding risk management into every project. I especially liked his views on risk ownership. It’s one thing to identify the risk facing any project, it’s another thing to assign accountability. Jutte says, “… assign a risk owner for each risk that you have found. The risk owner is the person in your team that has the responsibility to optimize this risk for the project.” We all know that when things go wrong on any project, not only is the timeline usually impacted, but even more critically, so is the budget. Jutte suggests that, ” Ownership also exists on another level. If a project threat occurs, someone has to pay the bill. This sounds logical, but it is an issue you have to address before a risk occurs. Especially if different business units, departments and suppliers are involved in your project, it becomes important who bears the consequences and has to empty his wallet.”
Most of us are experts at managing risk and we don’t even realize it. We do it every day on a more simplistic level, although the thought process is the same. For example, “How do I mitigate the risk of hitting traffic and being late for an important meeting?”. I check the traffic report ahead of time and leave 45 minutes early. “How do I mitigate the risk of my outdoor party being ruined by rain?”. I rent a tent. It may just seem like common sense, or luck, but in actuality we’re managing our personal risk. This type of thinking makes us good project managers at work and at home!
It’s important to think ahead and have a plan for the “unplanned”, and fortunately there are many tools available help you and your team manage risk. Whether you’re using a simple Risk Register in Excel or a more complex software tool specific to your industry, the goal is to achieve the best results with proactive planning. So in reality, I’m not all that lucky after all, I’m just an excellent risk manager. And while that may not help win the next billion-dollar lottery, it will keep my projects running smoothly, on-time and on-budget!
I’d love to hear your stories and ideas on this topic. Please feel free to reach out!
-Lynn Faughey, FlexPro COO