Risk Happens Guest post from Mike Clayton Why Every Project Manager Needs to Understand Risk Project Management is a discipline that was born out of necessity. We wouldn’t need separate tools and processes if projects weren?t so difficult. We need them because we have to make changes within constraints like budget, schedule, and performance. As a project manager, your job is to plan and define your project with care. Gather all data, then use your knowledge, expertise, and reasoning to create a plan. Planning Fallacy Daniel Kahneman, Amos Tversky called it “planning fallacy”. The belief that you can meet a deadline. Even if you have a history of over-runs. A plan that is not well-thought out is almost as bad as one that isn’t. President Eisenhower Shift: Plans are useless, but planning is everything. What happens when things go wrong? The universe doesn’t care about your plans. Risk Management is a second discipline. Project management is deeply intertwined? Risk Management is a result of the same necessity. Risk can be defined as uncertainty that can impact outcomes. This definition includes the two main components of risk: uncertainty and impact. These can be measured in many ways, such as financial, reputational, schedule, reputational or the level of disruption to your projects. There are many reasons uncertainty can occur. Here are seven of the most frequent:

Projects are one-off endeavors that create new products, services, or processes. Planning requires no prior experience or knowledge.

Planning assumptions can be flawed if you don’t have enough information, incorrect data, or an incorrect interpretation of the data.

You might miss something important in your planning.

Unexpectedly, someone intervenes? Unexpected because your analysis of stakeholders failed to predict what was expected, or because people sometimes act in unpredictable ways.

Unexpected occurrences Unforeseen, or perhaps unforeseeable? event occurs.? It is sometimes called a ‘black swan’ if it was unexpected. event.

It is predictable that an event will occur, but it can be unpredictable to the point where planning becomes impossible. Extreme weather and natural disasters fall under this category. We know that earthquakes can occur in certain locations, but we cannot predict exactly when and whereabouts.

Simple human error? Someone makes a mistake.

Project Management students must study risk management and learn to be comfortable with uncertainty. You must be able identify, analyse, and plan for risks. This is why I wrote “Risk Happens!” How to Manage Risk and Avoid Failure in Business Projects. Although it is written for newer project managers, I believe there is plenty of information that experienced professionals will find valuable and thought-provoking. You can find out more at http://riskhappens.co.uk. Get a copy of Risk Happens for free! My focus has always been on practical tools, techniques, and training project managers. This attitude has been carried into Risk Happens! I’m interested in your ideas and opinions on the best? I am interested in the most innovative and effective? Risk management tools and techniques. Leave your thoughts at the end of this post and Josh and me will give the winning response a complimentary copy Risk Happens! You have until October 31st 2011 to enter the contest so leave a comment!

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