Risk Analysis (or, How to Avoid Disaster)

Having a failed project in the portfolio will usually leave a bad taste in any project manager's mouth but failure can also be used as a teaching moment. It is said that it took more than 6000 attempts before Edison found the right material for his incandescent light bulb. When asked how it felt to fail so many times his answer was that he did not fail. He had found 6000 ways to not make a light bulb!

One major lesson to be learned is that every project needs a proper risk analysis before you spend too much money and effort on it... and plan ahead to meet the risks head on when and if they become reality. You should look at the following sources of risks, at a minimum, to analyze and come up with a mitigation plan.

Stakeholder Commitment

Stakeholders need to be absolutely committed to the project. It is no use going into a project if any of the major stakeholders are not convinced that the project will bring benefit to them or if they perceive a conflict with other parts of their strategic objectives. There is nothing more dangerous to a project than a stakeholder who will withdraw its support as soon as the going gets tough or if they see a tactical or strategic advantage in doing so. The stakeholders should ask themselves, “how does the project play into the stated strategic objectives of the company?” Questions should also be asked to determine the responsibilities of the decision makers, and the effect if these decisions are not made in time.

Planning

A project is based on three main pillars - scope, cost and time - and the PM should look at the three to find potential sources of risk. One should always ask: Is the scope well defined? Are the objectives clear and achievable? Do the supervisors know the limits of the scope? How will you control scope creep and gold plating? Can you break down the project into smaller subprojects for better management? Has the budget been well prepared, vetted and agreed to? What happens if the project runs into a cash flow problem? What happens if the estimate is not credible? What happens if the project conditions on site do not match conditions stated in the RFQ? Is the project too long? Is the Cone of Uncertainty a concern? Is the change management plan in place?

Resources

Resources are the backbone of all projects. Do you have adequate staff with proper experience and qualification? Have they worked with a similar client before? What is the risk of disruption due to staff turnover? Is there a proper HR plan in place? Are the roles and responsibilities of everyone clear? Have team members worked together before? If not, is team-work a concern? Are adequate resources available locally? Will [on job] training be required? Is there a correct balance between the direct and indirect resources? Is there a procurement system in place? What is the plan B in case one of your subcontractors does not perform according to expectations?

Monitoring and Control

This is where all projects succeed or fail. It is imperative that the PM ask themselves the following: Have adequate resources for control and monitoring provided for in the plan? Are processes in place?  Is the flow of information clear to everyone? Are the reporting requirements and responsibilities clear to everyone? Are the quality requirements clear to everyone? Is the ITP in place and being followed?

Closing

The most difficult part of a project happens to be the closing phase. I can speak with experience that if not properly planned for, the closing of a project can turn into a hellish, long, drawn out process without bringing in any income to the project. Please ask yourself if there is a proper process in place to close the project to everyone’s satisfaction.

There are other questions you may ask while performing a risk analysis for your project but these should point you in the right direction. Above everything else a PM should realize that there are no certainties in a project - the best you can do is to plan for known risks and be flexible enough to be able to meet unknown challenges if they arrive. Keep in mind, too, that risks may also be positive and be prepared to take advantage of such risks should they materialize.

A great tool for basic risk analysis is available on the Leading Answers blog. Although the excel spreadsheet (available for free download) is geared towards the IT industry, it may inspire you to come up with something similar for your own needs.