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What to do about Risk

FEATURED PAPER

By Lev Virine, Ph.D., P.Eng.; Michael Trumper; Eugenia Virine, PMP

Intaver Institute Inc.

Calgary, Alberta, Canada

 


In this article, we are going to learn how to deal with risk. You may be familiar with the PMBOK® Guide which describes a formalized approach to risk management. We are going to use a slightly different approach and focus on how choice engineering can be used for managing project risk. We will discuss a few simple techniques that you can use that will improve your ability to handle risk during the course of your projects.

Make It Simple

A couple of years ago we participated in a risk management conference for the aerospace industry. One of the presentations was titled “Risk Management for Human Space Exploration” and drew an especially large crowd. There were a couple of hundred engineers, researchers and students who gathered to learn about how to manage space exploration risk from a representative of one the largest aerospace organizations. However, topics did not cover risks associated with hostile aliens, deadly space debris, or black holes, instead attendees were presented with descriptions of the multiple regulations, procedures, directives, rules, and other documents which regulate risk management in these organizations. It was mind boggling to see how many documents are created by one particular organization for what is really quite a narrow subject. It probably took at least a dozen man years to write them. Merely showing an extremely compressed version of these documents caused mass lethargy in the audience. In fact, the presenter himself almost seemed to take on the persona of a hypnotist, droning on and on, seemingly intent on putting the crowd in a trance. It may well have happened for after the presentation ended and the lights snapped on, it was as if the hypnotist has snapped his fingers to bring his subject out of hypnosis. People wandered out of the presentation with a slightly mystified look, unable to recall many details of the past hour. This is really not the effect you are going for when you discuss risk processes.

In reality, risk management processes should be relatively simple, especially when you are trying to establish them. To help simplify the processes, choice engineering should be the main foundation of your risk management processes. Along these lines, you should first look to establish a few unobtrusive procedures which will steer people towards make better judgment regarding risk.

Consider these three issues:

  1. What events might occur during your project and what would be the impact of these?
  2. What is the probability that they will occur?
  3. What can we do either to minimize or take advantage of these events?

Many problems occur in the projects because, for one reason or another, people fail to ask these questions. When something happens during a project and causes a major problem and you asked why it happened, most project managers, if they were honest, would answer “We just did not think about it.”

Risk management guidelines, procedures, and regulations often hide the most important thing about risk management: it is a thinking exercise. So start with these three questions. Later on, when you are more confident, you can begin asking a few more questions, such as what triggered or caused this risk, what is the cost of the risk if it occurs, and so on. The process constitutes qualitative risk analysis. If you wanted to perform a more detailed statistical risk analysis based on your project schedule, we refer to this as quantitative risk analysis. If you are interested in finding out more about this, it is covered in detail our book “Project Decisions: The Art and Science) (Virine and Trumper, 2007).

To answer these questions, you should create a list of the risks with their probabilities (answer to question 1) and their impacts (answer to question 2). For example, before sending James Bond out to stop an evil mastermind from sabotaging the world’s economy, we suspect that his managers would ask him to complete a quick risk list that they had put together as part of their risk engineering process.

More…

To read entire paper, click here

 


About the Authors

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Lev Virine, PhD

Intaver Institute
Alberta, Canada

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Lev D. Virine
, Ph.D. has more than 25 years of experience as a structural engineer, software developer, and project manager. He has been involved in major projects performed by Fortune 500 companies and government agencies to establish effective decision analysis and risk management processes as well as to conduct risk analyses of complex projects. Lev’s current research interests include the application of decision analysis and risk management to project management. He writes and speaks around the world on the decision analysis process, the psychology of judgment and decision-making and risk management. Lev can be contacted at [email protected]

To view other works by Lev Virine, visit his author showcase in the PM World Library at http://pmworldlibrary.net/authors/lev-virine-phd/ 

 

pmwj19-feb2014-virine-AUTHOR2 TRUMPER
Michael Trumper

Intaver Institute
Alberta, Canada

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Michael Trumper
has over 20 years’ experience in communications, software design, and project risk and management. Michael is a partner at Intaver Institute Inc., a vendor of project risk management and analysis software. Michael has authored papers on quantitative methods in project estimation and risk analysis. He is a co-author of two books on project risk management and decision analysis. He has developed and delivered project risk analysis and management solutions to clients that include NASA, DOE, and Lockheed Martin.

To view other works by Michael Trumper, visit his author showcase in the PM World Library at http://pmworldlibrary.net/authors/michael-trumper/

 

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Eugenia Virine, PMP

Alberta, Canada

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Eugenia Virine
, PMP, is a senior manager for revenue development at Greyhound Canada. Over the past 12 years Eugenia has managed many complex projects in the areas of transportation and information technology. Her current research interests include project risk and decision analysis, project performance management, and project metrics. Eugenia holds B. Comm. degree from University of Calgary.

To view other works by Eugenia Virine, visit her author showcase in the PM World Library at http://pmworldlibrary.net/authors/eugenia-virine-pmp/