Chapter 14 - Risk Analysis

Part 1

Story

Dr. Rogers and John talk about the second meeting and John says: "Mr. Anson has suggested that the high-risk work packages should be further defined. But how do we know which work packages are particularly risky? We can't look into the future, can we?"

"You're right, John, it isn't possible to foresee risks. But it would be stupid not to implement risk management." "I agree, but how do you deal with conflicting risk assessments from different team members? Especially if they're pretty much experts in their respective fields. Am I thinking along the wrong lines?" "Well, you can be right and wrong at the same time!" "What does that mean?" asks John.

"Before I tell you another little story, let me say something that will seem more significant later on", says Dr. Rogers. "Many risks actually can be identified and effectively prevented if you use the proper means. You can prevent them from occurring or, at least, minimise their impact. We have to live with the consequences of some risks that we identify occurring because it would simply cost too much to prevent them. In those cases, risk transfer can be useful." "OK, but who do you transfer the risk to?" asks John. "There are several options. What about our customer or our line managers? Risks can be escalated to them. The people at that management level have more authority and can reduce the project manager's burden of responsibility. But insurance companies are also good risk transfer partners. Think about liability, fire, storm and hail insurance policies. They pay out if an unforeseeable loss occurs. We can also make provisions in our project such as float time, financial reserves. Or we can make some quality compromises so that we can continue to do a competent job when a risk event happens and safeguard our project's progress. I've mentioned risk occurrence a few times. Most of the time there aren't any major problems if a risk occurs. Once it's happened, the challenge is obvious, so we have to talk about the problem and resolve it. Usually, it's easy to solve any problem with a little money. Then we can move on and get back to the agenda! That's the motto!" says Dr. Rogers, grinning. "Sometimes, though, it isn't quite that easy. There may be a serious crisis in the project such as an accident that causes injuries or fatalities. In this kind of situation, fast decisions are crucial. And who's in a position to make fast decisions?" asks Dr. Rogers.

"Well, let me think", says John, a mischievous grin on his face, "That would be the project manager and his team." "Yes, but if delaying a decision means there's an imminent risk, the project manager has to make it alone", says Dr. Rogers. "Yes, you're right", agrees John.

"In other words, if I'm your customer, I have to rely on you as a project manager to do the right thing", continues Rogers. "I'm also there to back-up your decisions and help you keep your options open if you need me. I've entered these decision rules in our quality management system to make it quite clear that I'm formally transferring decision authority to you as of day X. Never hesitate. It's better to make a fast decision and keep the ball rolling than to hesitate and bring everything to a stop. If you keep the ball rolling, you can turn it and change its direction. Once it's come to a stop, it takes a lot of effort to change direction and, sometimes, it's impossible to get it rolling again." John is impressed. He never thought about it from that angle before.

"Now then, let me get back to my little story about risk management. I was at a project meeting back in June…"