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Risk or Constraint – Project Management Processes

Risk or Constraint – Project Management Processes
By James Clements

Risk Management is now accepted as a key ingredient in any mature project management framework and one of the key project management processes that you need to get right to effectively manage bids, proposals and projects.

One small but important part of this process is that a lot of people mix up constraints and risks during the risk analysis process. You will probably find in your risk workshops many constraints will be identified as well as risks and they require a clear differentiation and distinctly different treatment, luckily they are easy to identify if you are conscious of the difference.

As we know, a risk is something that may happen and that is why risk management processes are developed to monitor the project environment to identify their potential occurrence and treat them when and if they do occur.

A constraint however is something that will happen and as such you need to remove it from the risk register. Read the Complete Article

Types of Risk in Project Management

Types of Risk in Project Management
By Miley W. Merkhofer

The most common project risks are:

  • Cost risk, typically escalation of project costs due to poor cost estimating accuracy and scope creep.
  • Schedule risk, the risk that activities will take longer than expected. Slippages in schedule typically increase costs and, also, delay the receipt of project benefits, with a possible loss of competitive advantage.
  • Performance risk, the risk that the project will fail to produce results consistent with project specifications.

There are many other types of risks of concern to projects. These risks can result in cost, schedule, or performance problems and create other types of adverse consequences for the organization. For example:

  • Governance risk relates to board and management performance with regard to ethics, community stewardship, and company reputation.
  • Strategic risks result from errors in strategy, such as choosing a technology that can’t be made to work.
Read the Complete Article

What are the Components of Risk?

What are the Components of Risk?
By Abhilash Gopi

Risk has three components. These components need to be considered separately when determining on how to manage the risk

Risk Components are:

  • The event that could occur – the risk,
  • The probability that the event will occur – the likelihood,
  • The impact or consequence of the event if it occurs – the penalty (the price you pay).

About Abhilash Gopi In his own words

I got smitten by the Project Management bug when I was working under K.U. Harsha, my first Project Manager and have been lucky since then to work under democratic managers (Purushottam Sitla, Rekha Varma). I could learn on-job from these wonderful managers and has been equally successful in applying these principles.

I am currently working as a Senior Test Manager with Cordiant Technologies, Kochi, India. Cordiant ( is an Offshore Product Development Services provider for ISVs and Web Startups and its innovation is spearheaded by our President & CEO, Dennis Paul. Read the Complete Article

12 Wonderful Ways to Improve Your Risk Management

12 Wonderful Ways to Improve Your Risk Management
By Harry Hall

John Smith was hired as a new project manager at a leasing company, and he was assigned a small project with a team of six people. The project goal was to reduce customer billing defects by 10% before the end of the year. How well did John use risk management to accomplish his goal?

He and his team completed a project plan and identified project risks. He captured the risks in his risk register and periodically conducted risk reviews. Things were going so well that he was assigned two additional projects.

John started his new projects like the first one. However, he was overwhelmed as his project sponsors pushed him to deliver the new projects quickly. He skipped capturing his risks and conducting the risk reviews.

Slowly, John saw the project performance decline; there was greater variance between his schedule baselines and the actuals. Read the Complete Article

What Is the Silver Lining for Projects?

What Is the Silver Lining for Projects?
By Marge Tam

The proverb “For every cloud there is a silver lining” can be interpreted as for every difficult situation there is some good to it. The proverb is of said to the person that would welcome such an encouragement during trying times, and the person is unable to see any positive way forward.

In the framework of Project Management, the Project Risk Management Process brings the silver lining to the uncertainties that come with managing anything that occurs in the future. Many people tie the word ‘risk’ with the negative connotation. However, according to the PMBOK, there are both negative and positive risks. The negative risk has potential impacts downstream to the overall health of the project projects such as project slip, budget overrun, and unsatisfied customers. While positive risks are essentially opportunities that brings about return on investment, increased revenue and overall process improvements. Read the Complete Article

Contingency Usage Is a Leading Indicator of Project Trouble

Contingency Usage Is a Leading Indicator of Project Trouble
By Kiron D. Bondale

Contingency reserves are funds intended to be used to offset the negative financial impacts of realized risks. On schedules, we often use the alternate term buffer but we are really referencing the same concept.

Depending on the project funding policies of a given company, project managers may have the ability to directly authorize contingency drawdowns, as they are a component of your approved cost & schedule baselines.

But just because a project manager has the authority to utilize contingency without seeking additional approvals doesn’t mean that it shouldn’t be tracked and reported separately.

While contingency is supposed to be used to reduce impacts from realized risks, it can also be used to mask scope creep or to avoid going through project change management. I realize that there is often a very fine line between the realized risk of a missed requirement and scope change, but some project managers and sponsors treat contingency like a slush fund. Read the Complete Article

12 Sure-Fire Ways to Improve Project Risk Management

12 Sure-Fire Ways to Improve Project Risk Management
By Harry Hall

If you survey people involved in projects on the importance of risk management for achieving project objectives, a high percentage of the participants will say risk management is important or very important. I’ve seen survey results where 90% of the people thought risk management was important. So…why do few people employ and support risk management?

Many people have had a bad experience. Project managers have performed risk management poorly. Let’s look at several reasons why project risk management can become useless and what we can do to gain better project results through risk management.

  1. Failure to lead by example. In order for organizations to mature and benefit from risk management, leaders including sponsors and project managers must walk the talk. People resist change. Without a consistent example by those in authority, people will likely seize opportunities to revert to their former behaviors.
Read the Complete Article

How to Develop a Plan to Manage IT Risks

How to Develop a Plan to Manage IT Risks
By Harry Hall

Want to know the secret to managing IT risks?

Drumroll please…

A Risk Management Plan.

Simple, huh?

So simple as to be, well, let’s say completely useless. Because if you knew the secret to consistently managing IT risks, you’d already be doing it, right?

But instead, you continue doing what you’ve always done with a gnawing apprehension that your worst nightmare is just around the corner. You are too busy to “add risk management” to your list of things to do.

The problem is that many CIOs – even the top-tier CIOs – lack an adequate grasp of their IT risks. Even these top dogs understand that they’re one event away from losing the farm. Which risks are greatest?

  • Data security breach with reputational harm
  • Regulatory risks
  • Social media
  • Recruiting and retaining qualified IT staff
  • Improper balance of outsourcing
  • Cloud technologies
  • Transition to agile methods
  • Disaster recovery
  • Outdated operating systems
  • Data on user-owned mobile devices
  • Third-party risks

But there is a way to give you a better chance of not only surviving, but thriving in the face of great uncertainty. Read the Complete Article

Why Avoidance Should Be 1 of Your 7 Risk Responses

Why Avoidance Should Be 1 of Your 7 Risk Responses
By Harry Hall

Earlier I wrote about seven ways to respond to risks. One of the risk responses is avoidance. The focus of this strategy is to ensure the risk does not occur…that is, we eliminate the cause of the risk.

My Personal Story of Stupidity

It was Fall, and I had raked leaves in my back yard into three piles. I was trying to decide what to do with them. I knew there was a ban on burning in my area. We had been extremely dry for months.

What were my options? I could bag the leaves. I could carry the leaves down into the woods…or I could burn the leaves.

I thought to myself – surely I could burn the leaves. No one will ever know. Later, I would soak the areas to ensure the fires were extinguished.

Before I went to bed, I checked the three areas again…no embers, no sparks, no smoke. Read the Complete Article

Get Rid of Your Project’s Contingency

Get Rid of Your Project’s Contingency
By Christian Bisson

How many times have you heard this while creating estimates? Or how many times has the thought of doing this crossed your mind?

Regardless, contingency is needed in all your estimates, and it’s important to protect it.

A Few Typical Misconceptions About Contingency

  • It’s so we can give stakeholders added value throughout the project

    Contingency is often seen as this bundle of money we can use to give stakeholders some freebies as the project evolves and they make requests. Although in some circumstances it can help improve or maintain the relationship with the stakeholders if used wisely, it is still scope creep at the end of the day and can have a larger impact on your project then you think.

  • It adds unnecessary costs

    Some people simply do not know what contingency is and think it’s added costs that could prevent a potential contract to be signed.

Read the Complete Article