How does a simple, elegant architectural design become complicated and unwieldy? By coming in late and over budget, of course. Understanding why this happens requires a closer look at the approach to scheduling and risk management and to how these issues are addressed.
1. Gather Your Experts (1/6)
Find the most knowledgeable people in each project discipline and form a risk management team. The team will focus exclusively on the project's risks and assess risk at each new project phase.
Next: List the Risks
2. List the Risks (2/6)
The project manager will ask each risk management team member to identify up to six potential project risks. After each member has submitted a list, the team will meet to brainstorm additional risks. The risks are evaluated qualitatively for likelihood of occurrence and degree of negative effect.
Next: Develop Solutions
3. Develop Solutions (3/6)
The team will assign its members risks to analyze and for which to develop solutions. Disregard risks that have little chance of occurring to focus on the most realistic challenges.
Next: Review and Refine
4. Review and Refine (4/6)
The team reviews each member's work, and comments on and refines the suggested solutions.
Next: Set a Schedule
5. Set a Schedule (5/6)
Finally, the team will set a manageable schedule to review and evaluate risks, as well as the progress of the solutions. Schedule meetings on a weekly, monthly, and quarterly basis as the project requires.
Even when projects are well-designed, if they fail to meet budget and scheduling requirements, it is often because project managers struggle with the dynamics of scheduling and risk management. While studies have not precisely traced the percentage of projects that fail because of an encounter with unforeseen risks, it is probable that any project that runs into major unanticipated difficulties will finish late and over budget.
Meanwhile, researchers have looked at failures stemming specifically from scheduling problems. They have found that 39 percent of failed projects can be attributed to project managers' losing control of schedules. But losing control of a schedule is only part of the problem. The biggest contributor to failure is an unrealistic schedule, which can be tied to many factors, including poor scope definition and risk planning, as well as lack of definition of a "complete" project. Therefore, to enable projects to succeed, project managers must be proactive and anticipate and resolve the problems that undue risks and the resultant uncontrolled schedules can cause.
Risk and Opportunity
As the economy was falling into decline two years ago, the estimation process began on a brownfield project. A new factory was slated to be constructed on an abandoned factory site. The engineers identified a risk related to the availability of construction resources: building material manufacturers, fearing a declining market caused by the coming recession, would probably cut back on production to avoid building up inventories. In these circumstances, construction materials would be difficult to acquire in a timely manner.
The engineering team and project managers mitigated that problem by speeding up the development of the construction documents. Then, they turned the scarcity risk into an opportunity. Assuming that building material manufacturers would likely make and sell products at lower prices whenever possible, in order to maintain revenues and avoid laying off experienced workers during the downturn, the project managers pounced on the cost-saving opportunity and ended up shaving 25 percent off the original building materials estimate.
Had the risk not been identified and dealt with ahead of time, subcontractors would have had to delay the project waiting for materials, thereby delaying the schedule; alternately, they would have had to pay rush fees to ensure on-time delivery, negatively impacting the budget.
Seek Out Risks
In order to manage risks, they must first be identified. An effective, risk identification methodology encompasses the following five steps:
1. Gather the most knowledgeable people in each project discipline - procurement, operations, management, engineering, supply chain, and so on - and form a risk management team. The team's attention must be focused on the need to manage risks, and they must discuss the level of risk assessment appropriate to the project.
2. The project manager then asks each member of the risk management team to list four to six risks that he/she foresees developing during the project - along with any opportunities embedded in those risks. Once everyone has submitted a list, the team meets, eliminates any duplicate ideas, and brainstorms for additional risks to add to the list. The risks are evaluated in a qualitative sense for likelihood of occurrence and severity of impact.
3. Next the team assigns the practical risks to team members, who will develop countermeasures. It would be a waste of time to prepare for any risks that have little likelihood of occurring - beyond taking the normal life-safety precautions followed at every project site. But each of the practical risks should receive attention.
For example, development of a brownfield site involves utilizing abandoned site infrastructure that has fallen into disrepair. Site investigation can reveal environmental hazards that need to be addressed quickly. When these types of risks are identified up front, mitigation plans can be created that allow the project to be successful.
4. The team reviews all of the work needed, commenting on and refining the countermeasures suggested for each risk.
5. Finally the team sets a schedule to review and evaluate the risks, as well as the progress of the countermeasures. Such a schedule should call for weekly, monthly, and quarterly meetings as the project progresses.
The weekly meeting includes informal progress reviews and group comments designed to maintain focus on the risk. The monthly and quarterly meetings are more formal and designed to check off risks as having been avoided or not. If not, the team reviews the mitigation plan and ensures that it is on track. If it isn't, additional countermeasures are developed and implemented.
In addition, an evaluation of risk status should be performed to determine whether the risks have elevated up or down, as well as whether any new risks have surfaced. Of course, the regular meetings must also deal with risks that arise during the course of a project.