When to use Project Risk Management
(If you need any information on the subject which is not answered by these pages please
Email us.)
If you plan any changes in your business!
Normally business changes are made in order to change a level of activity in some way,
whether it be sales, cash flow, productivity, or product portfolio. When attempts are made
to make such changes, too often the business reverts to the old levels of activity as soon
as management attention is diverted.
To make lasting changes, the change is best managed as a project. The diagram
illustrates a properly managed project leading to a lasting change in levels of activity.
If the project does not meet the requirements of the business the line will tend to revert
to the previous level of activity over time.
Setting up a project is like planting a tree - people often neglect to make certain
that the roots are well laid, the tree is supported, it has plenty of suitable soil in
which to grow, and is cared for and watered copiously in the early stages. I remember
asking some gardners in a British Royal park why they were digging a hole at least as big
across as the height of the trees they were planting in it. The answer came back that the
tree was being planted to stand there for four hundred years. This article is to help you
set up your project in the early stages to have the best chance of growing like the tree
to fruitful maturity.
Money invested in reducing risk in the early stages of a project is money well
invested. Any risks incurred during the project have to be diagnosed, and fixed. Also
things have already gone wrong by the time the problem is detected and this will add to
the costs. The diagram illustrates the way costs of correcting risks at the initial start
up phase of a project balance against costs of correcting and managing a failure. The rate
of increase in cost of risk is exponential, and any risks that can be reduced or
eliminated during the start up phase will pay a generous dividend in limiting the total
project cost. It is much better to reduce the risks at the start up
phase of the project than to allow a contingency on a basis that things are bound to go
wrong, but we don't know what!
What if I have already begun my project
This is no problem. You can perform a risk assessment on the project and begin to apply
project risk management at any time. The risk assessment should find some of the major
things which are about to go wrong, and identify potential failures as the project
continues.
Project
Risk Management Index
Robert Tusler
To discuss the contents of this article, or for advice or information about project
risk management, write to us by clicking here.
Robert Tusler
is a member of the Alliance of Business Consultants
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This Page was created using WebEdit, 1 August
1996
Most recent revision 04 July 1998
