Preview to "Sponsor's Guide to Project RIsk" - Author's Notes

Throughout my work-life adventure I have been intrigued by the concept of predictive modeling that incorporates human behavior and unexpected departures from the plan. Moving from the quantitatively mature state of engineering and construction to the 'squishy' estimates of technology planning lead to the book that is the basis for this preview.

One of my most interesting, and formative, undertakings was made possible by early personal computing. The challenge was to differentiate design/build approaches in a mature industry (electric utility). A new analysis method was indicated as recent commercial bidding practices showed competitive cost and schedule quotes to be both 'too close to call' and a poor predictor of outcomes.

We integrated cost, schedule and Monte-Carlo estimating into a database that included cost of money, replacement product, etc. The estimating system drove constrained scheduling that impacted the project outcome economics. Pattern analysis revealed that certain areas of work had a disproportionate impact on the final outcomes. Most important, senior managers were asked to predict high confidence outcomes for each of the studied scenarios. To everyone's surprise, the model tracked the 'expert's opinions' as the scenarios diverged with increasing confidence.

We pick up the story again when planning for a quadrennial sporting event. The threat of senseless violence had complicated matters adding new dimensions to the planning process. Predicting life safety issues in support of business investment decisions focuses one's attention. Various security measures were compared. Many of the 'experts' were focused on probability for various initiators. Our analysis revealed that the dominant component for investment decision-making was effectiveness in mitigation, justifying the strategies eventually employed.

Today, project managers are faced with technology and life science projects having critical success factors of discovery and obsolescence occurring within the business justification horizon. The quantitative planning methods developed over decades of repeatable work found in areas such as engineering and construction are poor proxies for scope ambiguity driven by emerging technologies, time to market requirements and perishable skills.

I selected project risk management as the starting point for a series of guides as it is frequently ignored or applied as a 'minimum misery' task rather than a primary and ongoing contributor to management decisions. As an illustration, technology project planning involves selecting among execution methodology options. This selection implies a valuation and ranking process. Whether casual or formal, these decisions determine the project risk profile and should be influenced by robust risk analysis and management. Changing risk appetite and/or market conditions can dictate a change in execution strategy.

In deconstructing project planning for the elements needed to address today's project challenges, it became obvious that risk (i.e. contingent opportunity/liability) management would need to be a robust contributor to the process, driven by both ambiguity and dynamic success factors. When risk decisions are made in the project life-cycle is dependent upon the development of sufficient information. Technology projects often lack the definition necessary to apply quantitative history techniques. A new approach yielding an acceptable level of confidence from anecdotal sources that can be economically matured over the life of the project is indicated.

Project sponsors may be presented with approaches to project risk management that are diverse in both method and effectiveness. My goal is to provide an understanding of application and elemental concepts to support prudent review and confident approval of risk management planning. I will discuss 'why' and 'what for' with only enough 'how' to integrate the pieces. Thus empowered, project sponsors can apply one of my favorite aphorisms, "If you are seeking better answers, then you must ask better questions."

Subsequent articles will introduce the atomic structure of project risk and how these elements interact to achieve the objective of "managed risk". Although project sponsors are my primary audience, all project stakeholders are interested parties. Project risk practitioners in particular should take note of the heightened level of scrutiny that sponsors and stakeholders will bring to the discussion.

Up Next - Vulnerability

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