RISK MANAGEMENT FOR PROJECT MANAGERS
Risk management is the process of identifying the areas
of risk within a program and taking corrective action to reduce the risk to an
acceptable level. Today, many acquisition reform initiatives seek to move the
acquisition system from a risk adverse to a risk management philosophy. Risk
management philosophy is the enabling of sound strategic and tactical judgments
and minimizing the inevitable risks associated with haphazard judgments. They
streamline processes, reduce oversight and control, and seek to reduce cost.
Greater emphasis is required on the offerors' risk mitigation techniques. The
word conservative could define my risk management philosophy. However, I know
that there is no reward without taking risk. Instead of waiting for incidents
to happen I would rather preventing the risk and would have a low-level risk
tolerance to keep my program alive. This does not mean eliminating all
identified risks completely; rather I would choose risk retention when it is appropriate
after giving consideration to factors.
The management of risk is integral to the effective and
efficient management of the Project Management (PM) office. Before the
application of the risk management process, first I would develop an
organizational risk management philosophy and awareness of risk at senior
levels. (Train, educate and brief them). Next I would establish a risk
management Integrated Product Team (IPT). I would develop and document the risk
management policy, prepare my risk management plan and its objectives. I would
make sure the participation of all staff in risk management efforts. Another
crucial issue is the user involvement. I will do my best to understand the user
requirements right and minimize the requirements creep after we started the
program.
Communication and coordination within and between the
program office and the contractors should be kept at the highest possible
level. Test Management Plan, Program and risk plans are good elements to
utilize for effective communication.
I would summarize my risk management philosophy and
implementation as follows:
. Identify
concerns.
. Identify
risks and risk owners, establish an IPT: The Work Breakdown Structure (WBS),
Statement of Work (SOW) and proposals are recommended as structures for
assessing risks. PM must allocate the responsibility for resolving risks to the
appropriate function, specialty and people. PM must decide on how much of the
risk will be retained in the PM office and personnel and how much will be
transferred to the contractors via different type of contracts etc.
. Evaluate
the likelihood of the risks and consequences
. Assess
the options for accommodating risk; identify the mitigation strategy for each
risk. Possible methods are avoidance, control, assumption (simply accepting the
risk and proceeding), transferring the risk to another program element, etc.
. Prioritize
the risk management efforts. PM will allocate his resources for risk management
efforts regarding their priorities.
. Develop
the risk management policy and plan upfront early.
. Authorize
the implementation of the risk management plans. Make or buy decisions,
development tests and engineering analyses are some of the risk management
tools to mitigate them by overcoming inexperience and lack of knowledge of
specific issues.
. Monitor
the risk management efforts and manage accordingly. For example monthly risk
review sessions can be beneficial. Continuous Risk Management strategy is very
effective and must be applied since it selects methods and processes, which
best fit our program and organizational culture.
The secret of risk management is to be creative in
implementing the risk management philosophy and plan.
Finally, PM should always remember the human element
while managing the risk. Human factor is the most crucial one for the ultimate
success of every project.
Ugur Erdemir
Logistics and Acquisition Professional, Industrial Engineer
ugurerdemir1975@hotmail.com
See also:
Warehouse Site Selection Projects and Models- http://warehousesiteselection.blogspot.com/
Excess Inventory and Disposal- http://excessinventoryanddisposal.blogspot.com/
