Avoiding a Project's Most Threatening Risks

Have you ever deviated from your regular driving route because excessive traffic or road construction may have put you at risk of being late for an important appointment?

In everyday life, people often modify their personal plans or schedules in order to avoid the unwanted consequences of potential risks. In the same way, project managers are often forced to change or modify their project plans in order to eliminate threatening project risks.

As a project manager, you will encounter various risks throughout your project's development. Although you can never prevent every project risk, you should make every attempt to eliminate as many as possible.

One risk response strategy that you can use to help you achieve a successful project completion is avoidance. Avoidance involves changing your project plan to eliminate an identified risk or the condition that causes the risk. This risk response strategy also involves protecting your project objectives from the impact of identified risks.

As a project manager, you can often respond to some risks that arise early in the life cycle of a project by clarifying requirements, obtaining information, improving communication or acquiring expertise. However, there are other types of project risks that you will need to avoid in order to promote a successful project completion. These types of risks include those that have a high probability of negatively impacting project objectives and those that have the ability to cause complete project failure.

Avoidance is one strategy that you can use to help you deal with these types of risks. Such things as reducing scope to avoid high-risk activities, adding resources or time, adopting a familiar approach instead of an innovative one or avoiding an unfamiliar contractor are all ways in which you can eliminate threatening project risks.

The first type of risk that you should avoid during the life cycle of your projects is unacceptable risks. These types of risks have a high probability of occurrence and an extreme or very high level of potential impact.

You should also avoid uncontrollable risks. These risks cannot be absorbed by the project's available resources or existing contingency reserves. They are also risks that do not have mitigation or transference strategies available.

The last type of risk that you should avoid throughout your project's development is potentially harmful risks. These risks are especially threatening to project success because they have the potential to harm a project's personnel.

As a project manager, there are three key questions that you can ask in order to determine if an identified project risk should be avoided. If you can answer "yes" to even one of these questions, the risk that you are examining should be flagged for avoidance. The three questions include:

• Is the level of risk unacceptable?
• Are the means for controlling the risk unfeasible?
• Is there a potential for harm?

As a project manager, how do you determine whether the level of an identified risk is unacceptable to your project and its outcomes? One of the best ways to answer this question is to examine the prioritized list of quantified risks that resulted from your project's quantitative risk analysis process.

This list indicates which risks pose the greatest threat or present the greatest opportunity to your project objectives and overall outcomes. This prioritized list of quantified risks also includes a measure of potential risk impact.

You should examine your project's prioritized list of quantified risks and set aside those risks that have an extreme or very high level of potential impact. Once this is done, you should make every effort to modify your current project plan in order to avoid these types of risks. Typically, project managers classify risks with an extreme or very high level of potential impact as unacceptable because of the possible danger they pose to the success of overall project outcomes.

Another element to consider when trying to determine whether the level of an identified project risk is unacceptable is the risk thresholds for the project. Risk thresholds, which are established in a project's risk management plan, indicate the level of risk that is acceptable to individual project stakeholders. If you have identified a project risk that has the potential to greatly exceed one or more of the established risk thresholds for your project, this is a risk to avoid because it threatens the successful completion of your project.

Another question to consider when trying to determine if an identified project risk should be avoided is: are the means for controlling the risk unfeasible? All projects are subject to such things as cost and time constraints. As a result, some project risks may be too expensive to control.

In addition, most projects are allotted a limited amount of contingency reserves. These reserves are the amount of money or time needed to reduce the impact of cost and schedule overruns on critical project objectives and outcomes.

If you find that the means for controlling one of your identified risks is not feasible and cannot be absorbed by your project's available contingency reserves, this is a risk that you should avoid. A careful examination of such things as your project budget, schedule, and personnel and material resources will help you decide whether your project has the means to reduce or eliminate the risk's potential impact or whether it would be more beneficial to avoid the risk altogether.

The third and final question that project managers can ask in order to determine whether an identified project risk should be avoided is: Is there a potential for harm? In most cases, a risk is considered harmful if it involves the presence of dangerous materials or conditions at the project site.

Project managers must be able to identify any risks that have the potential to harm their project team members or stakeholders. These risks may include such things as faulty machinery or unsafe working conditions.

More examples of harmful project risks are listed below. As a project manager, you should immediately flag these types of risks for avoidance. These risks include:

• tasks that involve handling, storage or disposal of hazardous materials
• major construction work in locations vulnerable to seismic activity
• other potentially damaging natural events.

It is important to remember that unforeseen risks will continue to arise as a project progresses. As a project manager, it is your responsibility to analyze these unexpected risks, as well as all identified project risks, in order to determine if they should be avoided. Once this decision is made, you can then modify your project plan to avoid the selected risks. This will help you ensure that your project remains on a progressive track and heads toward a successful completion.

Avoidance is sometimes the best response. As a project manager, you can use avoidance to eliminate some of your project's most threatening risks and their potential impact. This risk response strategy is a key contributor to overall project success.

Common Causes of Project Risk

Marina is a project manager for Outback Retailers. Her current project involves the development of a new type of high-speed racing bike. She has learned that there are several identified risks that have the potential to negatively impact her project objectives.

As a result, Marina is trying to develop risk responses that will eliminate or reduce the impact of these identified risks. Do you think it is possible for Marina to address two or more of her project risks with the same response?

Yes! By addressing more than one project risk with the same response, Marina will be able to deal with risk threats and risk opportunities more quickly, which will maximize the likelihood of a successful project completion.

Every project will encounter numerous risks. Many of these risks will be driven by a common risk cause. A common risk cause is an event or situation that produces more than one project risk.

As a project manager, you can identify common risk causes during the risk identification and risk analysis processes. It is important to take advantage of these opportunities whenever and wherever possible.

It is important to remember that every project is unique. Therefore, you cannot expect to identify the same common risk causes in every project that you manage. However, there are some causes that may occur more frequently than others. These common risk causes include:

• unavailability of resources
• inadequate quality standards
• lack of communication
• inadequate tools or technology

One common risk cause that may threaten the successful completion of your project is unavailability of resources. These resources may be people or materials. During the life cycle of your project, many risks may arise if you do not have sufficient personnel or supplies available to complete the project as planned. Such things as excessive cost and schedule overruns are only two of the risks that you may encounter if your project is threatened by a lack of available workers or materials.

Another common risk cause is inadequate quality standards. Identifying this common risk cause early in the course of a project is especially valuable because this risk cause has the potential to create several project risks that can adversely affect the promised consumer deliverable.

As a project manager, it is important to remember that if quality standards are not properly set or are not specific enough, your project will either fall below the expected standard or aim for a standard not required by the client.

Marina, from Outback Retailers, is beginning the risk response planning process for her current project. After studying the results from her project's other risk management processes, she finds that some of the quality procedures that concern the new product are not clearly detailed. In addition, phase three may be short by two people due to a recent staff reduction. Marina hopes that the identification of these two common risk causes up front will help make her risk response planning process more efficient.

A lack of communication is another example of a common risk cause. In daily life, whether at home or at the office, people often suffer the unpleasant consequences of not giving or receiving adequate or accurate information. This is especially true in project management. If clear and open lines of communication are not firmly established, a project may be put in serious jeopardy. Such things as change requests and project plan modifications may not be properly carried out if there is a break in communication.

Inadequate tools or technology is a common risk cause that can severely impact the outcome of a project. It is difficult to develop a product efficiently or according to its established standards if you do not have the adequate tools or technology to complete the product as specified in the project plan.

It is also possible that a project may suffer a complete failure if critical tools are not readily at hand when needed. This common risk cause may also result in project deliverables not meeting widely accepted industry standards.

As a project manager, it is important to remember that some of your project risks may be driven by a common risk cause. As a result, the identification of these common risk causes is a valuable input to risk response planning because it may allow you to address more than one project risk with a single response. This will help eliminate the creation of redundant risk responses and make your risk response planning process more efficient.