| Revision History | ||
|---|---|---|
| Revision 1.1 | 23 January 2001 | |
Risk management is a critical part of project management, but it has one major problem - the word "risk." This word is ruining the subject, and we should do something about it.
Risk is fun. At least our culture sees it that way. The 1980s Tom Cruise movie "Risky Business" is one example. Cruise's character took a risk, came close to catastrophe, but got away with it and had a thrilling and fun time. Another example is the saying "it is better to have loved and lost than never to loved at all." Our culture is full of other risk takers. They risked it all (money, family, house, whatever) and succeeded.
Our culture's perspective on risk is a bad influence on project managers and our profession. New managers think of fun when they hear about risk management. These popular but misguided thoughts contribute to poorly managed projects. We hear of risk in a project, and since we're rugged individuals who will take risks to achieve big payoffs, we charge ahead.
Risk in a project means "potential problem" not "potential exhilaration and potential fun." A project with risk is a project that has potential problems (don't they all?). I can identify those potential problems, assign a probability of occurrence, and assign a cost if those problem occurs. (Much has been written about risk management, and this is not a tutorial.)
To separate pop culture from proper project management, I suggest the PM-RMUT (project manager's risk management understanding test). Every time someone says the word risk, apply the PM-RMUT by substituting the words "potential problem." If the result does not make sense, we have a person using the fun version of risk -- and we have a big problem. Try this with common cultural phrases such as "we take risks here" and "risks have big payoffs."
There are things we can do about this risk business. First, maybe we should change the name. Rather than presenting risk management information, discuss managing potential problems for a project. For example, "A $10M project has several potential problems. There is a 50/50 chance these problems will occur and this will be a $13M project." That communicates reality more than saying, "The project is risky."
A second strategy is to plan projects with the potential problems in mind. The simplest way is to set aside a management reserve to handle problems. Some organizations do not allow a management reserve. In those cases, structure the project to absorb extra costs. Set problem triggers as early as possible. If a potential problem becomes a real one, drop features from the project and use those resources to handle the problem.
Finally, talk with people about managing potential problems (risk management). Many smart, conscientious people fail the PM-RMUT. They need informal, simple instruction from an understanding person. Also, listen to people and they way discuss risk. There is much we can learn from other cultures about potential problems and opportunities for fun.