The importance of Risk Management in Project Management

Hello and welcome to this session. What I would like to talk about today is the importance of Risk Management in the Project Management arena. We see the project management body of knowledge and we talk about scope management, time management and cost management. Risk Management comes in at about 8th in the 10 listed in the project management body of knowledge. What I wanted to demonstrate is that risk management is potentially the biggest part of project management planning process. When we identify our project objectives and so forth, the first thing we do in our plan is to develop a work management structure and that tells us all of the things we need to do to make this project happen. And often then we assign resources, dollars and schedule to those or durations. We put them into our GANT chart and at the end of that process we add them all up and we know exactly when the project is going to finish, how much it is going to cost and what the resources are that we need. Often that is all we get allocated. The problem with doing that is we have not at this stage identified any risk.

When we identify risks, we also identify treatments that need to be part of that risk management process. Those treatments need to be put into your work break down structure as activities and they need to be resourced and have time put against those as well. On top of that the residual that comes from the risk needs to be captured as contingency as part of the project. In my experience, many projects say they need 10%/15%/20% contingency but they haven’t allocated that against specific risks. Worse than that are the projects that find themselves in a position where they are told, how much they have to spend and when the project is to be delivered without even doing any of the planning. That makes it extremely problematic with regard to the success of that project.

So, what we need to do in terms of our project planning, is to make sure we have captured the risks against every one of those work breakdown structure activities, we need to make sure that the treatments also go in as activities and are resourced, and we need to have our risk budget so we can deal with issues that might occur during the project. If you don’t do this as part of the planning process, and I’ve seen it happen, where we have had project risk assessments done after a request for tender has been sent out or after a contract has even been signed and that is far too late in the process. If you haven’t done those fundamental things before you actually go and get your budget and your duration set you are going to be severely under done. That is why, in my opinion, most project fail. It is because they have failed to think about risk management. A risk manager in a project doesn’t need to have too much knowledge of project managing but a project manager cannot succeed unless they understand the fundamental processes around project management. If you do have those fundamental processes, then you will build those into your schedule and your budget and you are going to succeed more times than you are going to fail. That’s all I’ve got for this session, as always, let’s be careful out there.

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