Rita Mulcahy s Common Stumbling Blocks in Risk Management 2004
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1 About Rita Mulcahy, PMP Top 5 Risk Management Mistakes That Can Ruin Your Career An internationally recognized expert in advanced project management, the PMP Exam and risk management Author of the world wide best selling book PMP Exam Prep, PMP simulation software called PM FASTrack and the author of the course in a book, Risk Management for Project Managers, and other risk management tools Has been asked to make encore presentations at PMI s Annual conference an unheard of 5 times President of RMC Project Management, innovators in project management products and training since 1991 Presented by: Rita Mulcahy, PMP Copyright RMC Project Management Top 5 Risk Management Mistakes That Can Ruin Your Career Presented by: Rita Mulcahy, PMP Copyright RMC Project Management Ask Questions! People Do Not Think They Have Risks! Please stay for the question and answer session after this presentation. It is usually the most interesting part of the presentation. Besides, if you ask questions you can win a 1
2 PROJECT Rita Mulcahy s Common Stumbling Blocks in Risk Management 2004 What is Risk Management? The Risk Management Process Initiating Project Charter Best Time Risk Management is Done at The Wrong Time Planning Scope statement Team WBS Network diagram Estimate time and cost Critical path Schedule, Budget Communication requirements Quality standards Risk Iterations go back Management plans Project control system Final project plan development Formal project plan approval Hold kickoff meeting The Risk Management Process Includes: Looking for opportunities as well as risks Identifying risks by work package Coming up with hundreds of risks not just 20 Mistake #1 How About This One? Are these risks? We do not have enough people We do not have enough time Due to upper management not supporting the project, resources will not be available, resulting in not being able to complete the project on time. 2
3 No! It Is Just Poor Project Management Issues of lack of support or lack of resources MUST be dealt with before the project starts. The project plan must be achievable and bought-into before starting work. This is not a risk. A Risk is Something That is Less Than 100% Certain A risk is something that is less than 100% probable! Anything that is 100% probable must be addressed in the project plan, not as part of risk management. Create a standard for what is a certainty and what is a risk. Anything that is less than 80% probable is a risk, greater than 80% will be handled as a fact in the project plan. Mistake #2 No! Risks are Not Properly Named. Is Poor Communication a Risk? We need more information in order to act on the risk. Use the cause-risk effect format whenever possible. Poor communication of customers needs regarding installation of system XXX will cause two weeks of rework. Instruct those identifying risks to use the cause-risk-effect format. Mistake #3 Whole Categories of Risk are Missed. Create a list of risk categories Some Commonly Missed Risk Categories Project management Culture Quality Technology Customer satisfaction Company organization Contracts Vendors and suppliers Changes in the marketplace Changes to the competitors customers 3
4 Mean = Rita Mulcahy s Common Stumbling Blocks in Risk Management 2004 Mistake #4 Imagine Having This Many Risks Risk Qualification takes too long. Risk Qualification Chart Mistake #5 Why not come up with a faster way to sort risks and have fun at the same time? People think a software dashboard or some other software feature is all one needs to do to complete risk management. There Is No Magic Bullet For Risk Mistake #6 As risk management becomes more talked about, more software providers and consultants will say their products show project risk. Be wary! There is no magic bullet that should bypass the risk management process. Forecast: Total Project cost 5,000 Trials Cumulative Chart 0 Outliers People do not realize that risk management can help prove the value of project management Planning Decreases Project Time and Cost Planning Decreases Project Time and Cost Planning Decreases Project Time and Cost 4
5 Risks Can Be Eliminated Prove the Value of PM! Original Budget Task 1 Risks Removed Cost Estimate $ 300,000 Task 1 Budget after Risk Management Cost Estimate $100,000 Risk Management Planning Identification Qualification Risk Score Quantification Expected Value Response Planning Monitoring and Control ,000 2,400, ,000 2,000, $29,000 Total Cost Estimate $3,600,000 Reserve Revised Cost Estimate 300,000 $3,100,000 New 4.3 New $3,225 Mistake #7 Mistake #8 People do not realize there should be an action plan in place BEFORE any risk occurs! People waste time by doing the wrong things while the project work is being done. No Meetings Needed Answer 5
6 People Forget These Risk Monitoring and Control Activities Revisit low ranking or non-critical risks to see if risk responses need to be determined Adjust to deal with the severity of actual risk events Look for any unexpected effects or consequences of risk events Re-evaluate risk identification, qualification and quantification when the project deviates from the baseline Update risk plans Make changes to the project plan when new risk responses are developed Create a database of risk data for use throughout the organization An Excerpt from the book PMP Exam Prep by Rita Mulcahy Mistake #9 Contracts are finalized without risk management input. Contracts are risk mitigation tools and require the project manager s risk input in order to make the contract appropriate for the project. Ask sellers or buyers for their top risks on the project. Mistake #10 Tell them the consequences Project managers do not push back. Because the customer is not sure of the functionality of the XXX system, changes are expected. For every change in this area there will be a three to six day delay of the project with a $10,000 cost for each occurrence. Because there is a lack of final approval of the feasibility of the XXX system design, component changes are expected. For every change there will be a two-week delay and a $12,000 impact. 6
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