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Insights on Project Risk Best Practices

November 01, 2022 |   | 
3 minutes read
Dr David Hulett

Dr David Hulett

Project Risk Management Insights from
Dr. David Hulett

In this Blog Dr David Hulett provides a summary of insights for Project Risk professionals who face challenges within the Project Risk Management arena. Dr Hulett answers key questions in a succinct summary format, providing a preview to his online course. To register for this valuable online course, click on the Register Now link below.

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What are the Top Challenges Facing Project Risk Professionals?

Project Risk professionals have to deal with several foundational issues in their working environment before they commit to a quantitative Risk analysis, say of schedule Risk or integrated cost-schedule Risk analysis. These issues include:

  • Is the corporate culture supportive of the effort? What are the signs of lack of support?

  • Are the project controls systems providing foundational project schedule and cost estimates compliant with best-practices?

  • Does the working environment encourage and enable gathering of unbiased data on all Risks that should be included in the analysis?

A Supportive Corporate Culture Starts at the Top of the Organization

Over fifteen years of being involved in Project Risk Management, I have learned a few things about the process, the people and the politics of managing Project Risk. 
The organization’s management must support professional Risk analysis. The organization needs to both support and also avoid impeding professionalism in the conduct of the analysis.

  • First, the organization’s management must be willing to use and communicate to others the results of the analysis as the "best guess" about the project’s future, including when it will really finish and at what cost.

  • In some organizations, management dictates the "acceptable" finish date and cost that can result from the Risk analysis. Alternatively, after the analysis is finished the organization may reject the results and require a "do-over,” the “make it fit” requirement, because the customer of the project has been fore-told a different conclusion. If management, for example, enforces changes to the schedule that cause it to diverge from scheduling best practices, the foundation of the Risk analysis is compromised, and new Risks may need to be created in the process. The Risk analyst has thus been transformed from a professional to a clerk.

  • Does management provide sufficient qualified Risk analysis resources to stand up enough analysts to do the work? Does management allow enough time for the analysis to be performed?

The Project Schedule Needs to Comply with Scheduling Best Practices 

While the subject is project Risk analysis, the project schedule is the foundation of any Monte Carlo modeling. Many people do not fully appreciate the importance of scheduling to the quality of the Risk analysis results.

Project schedulers often are not aware of scheduling best practices, perhaps not having been taught the fundamentals when they became schedulers. Also, many detailed schedules are overly large for a Risk analysis exercise. The larger schedules often exhibit the use of constraints, lags, incomplete and incorrect logic, illogical total float, missing coverage of all the work – each of these findings invalidates the Risk analysis.

Often the overly-large schedules cannot be fixed. In this case, professional schedulers who are aware of best practices may construct a summary or “analysis” schedule of fewer activities that can be built from the start to be consistent with best practices. A summary schedule cannot be used for detailed, daily crew assignments or progress reporting, and it must be signed-off as representing the project by both owner and contractor, it will serve well for a Risk analysis.

The Environment Must Support Identifying all Risks Known at the Time 

Most projects already have, or will need to develop, a Risk Register that includes the Risks that will be modeled. The conditions of gathering those Risks often compromise the quality of the Risk Register that is the source of data for Risk modeling.

Often Risk Registers are gathered in group settings such as Risk workshops. There are many validated influences on project participants when meeting in response to a request to contribute to a workshop.

Collecting data, even about the identity of Risks, is often more successful and isolated from the biases that occur during workshops by organizing a series of confidential one-on-one interviews with project participants (team leads, managers, designers, contractors). These interviews always uncover Risks that were not in the established Risk Register, in part because they were too sensitive, consequential, or their insertion in the analysis would challenge the organization’s published promises or statements to others. Other benefits of interviews include that:

  • Interviews take less time away from the desk for each interviewee. Interviews average about 2 hours each, which contrasts to an 8-hour day for the Risk workshop.

  • The interviewee can discuss his / her ideas in depth for the full 2 hours (after a short introduction explaining the confidentiality aspect) to someone who wants to hear what they have to say. In a workshop, the only person talking for 2 hours is the project manager. The PM is often biased to make the project look good, and others do not want to contradict him / her in public for fear of retribution.

Summary of Conditions that are Foundational to Conducting a Risk Analysis 

Scheduling can be improved with training and attracting qualified schedulers to the project. The organization can easily start to use confidential 2-hour interviews rather than Risk workshops, although a limited number of interviews (e.g., 4) can be conducted in a day, making the data collection phase take longer than a one-day workshop.

Of the three conditions, the supportive corporate culture is the most important, and yet it is the most challenging to be addressed. This challenge may be overcome if there is a dramatic instance when a Risk that had been highlighted but not mitigated occurs with serious consequence for the project and perhaps the organization’s reputation.