Advanced Risk Management: Planning for the Unexpected

There’s an entire domain of project management that is concerned with planning for events when things don’t go as expected. It is known as risk management and typically involves trying to reduce the impact or probability that an undesirable event takes place.

If the project goal is to deliver value, risks can be seen as anti-value, because the increase costs and imply delays.

For example, a construction project in Cuba might try to reschedule the bulk of the work to be completed before June or July to avoid the risk of weather disruption (or damage) during hurricane season.

Most project management theory around risk management focuses on what, in my experience, is only half of the picture: risk management of foreseeable events.

There are always things that can go wrong in a project that have not been, or even cannot be foreseen. What if a meteor destroys the prototype? What if a new tax on input raw materials is suddenly introduced? What if negotiations that were completed on the last six occasions in one day take four months the next time? Individually these examples might be rare, but the chance that something unforeseen happens in a project is much larger.

How Can you Manage the Unknown?

Once we agree that unexpected events can have a serious impact on the project, the question becomes “how can we manage them?”

Since we do not know the risks, we cannot identify them or come up with a strategy to deal with them directly. However it is much easier to imagine the possible impact on a project since this can be divided into a few limited areas; generally worse time, cost or quality for a given part of a project.

For example a project manager might therefore create an unknown risk that will cause a delay in the preparation-phase of a construction project. Even if the cause is unknown, the project team can still come up with a mitigation plan and recovery plan to deal with it if it were to occur.

The team might deal with this risk by requesting that contracts with local workers have flexibility regarding start date (mitigating cost impact) and adding additional schedule buffer to the project time-line (mitigating time impact). A recovery plan might also be drafted that includes discussions with stakeholders to determine if additional workers should be hired to try to recover some of the lost time.

Later on in the project, when a weak bridge near the production location delays deliveries of raw materials for several weeks the team is surprised but not unprepared. Even without knowing the exact event that would cause the delay (the weak bridge) the project team was able to build resilience into the project by using advanced risk management to plan for the consequences of such an event.

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