Risk Knowledge Area

The Risky Business of Projects

I teach Project Management at the University of Arizona, and my graduate students write a paper on one of four topics, one of which is: “Discuss how the leadership/management of a small project (<$10M) differs from that of a large mega-project (>$100M).”  I’ve taught for over four years, and in one of my previous classes, I had a student write that Risk Management for small projects was optional.

I’ll give the student the benefit of the doubt; perhaps he or she did not fully express what he or she thought.  However, the statement could not have been more inaccurate.

In this post, I will address the Knowledge Area of Risk Management in the context of small projects.  This is the latest in a series that examines how small projects can tailor the 49 processes of the Project Management Institute’s (PMI) framework.  Typically, large projects need to do them all.  However, what about small projects?  They have limited resources – both in terms of resources and budget – and perhaps don’t need to engage in the same activities to the same degree.

Within the Risk Management Knowledge Area, there are six processes, organized into the Process Groups identified in the table below:

Initiating Process Group

Planning Process Group

Executing Process Group

Monitoring and Controlling Process Group

  • N/A
  • Plan Risk Management
  • Identify Risks
  • Perform Qualitative Risk Management
  • Perform Quantitative Risk Management
  • Plan Risk Responses
  • N/A
  • Control Risks

 

Today I’ll tackle Plan Risk Management.  As students of PMI or regular readers of this space will notice, each Knowledge Area has a “Plan (Insert Knowledge Area Here) Management” process and I like to address it by itself.  The output of each becomes a chapter of a larger book.  For example, the output of Plan Risk Management is the Risk Management Plan.  It is a component of the comprehensive Project Management Plan.

Proper planning is integral to projects of all sizes, which is why I spend a disproportionate amount of time on it within each Knowledge Area.  Project Management guru Andy Crowe notes in his 2006 book Alpha Project Managers that the best and most successful in the field spend twice as much time planning as their peers.

So, the other processes with Risk Management will be addressed in subsequent posts.

According to the 5th edition of PMI’s Project Management Body of Knowledge, Plan Risk Management is “the process of defining how to conduct risk management activities for a project” (p. 309).  Remember that a risk is something that has not yet occurred.  If it does, it could have a positive or negative impact on key project parameters.  For example, a negative risk could be:  “If the project cannot find a Java programmer by 11/3, the delivery of the primary project deliverable will be delayed on a day-for-day business and cost $1M in award fee.”

However, remember that risks can also be positive.  These are called opportunities.  “If we can qualify ACME Suppliers for widgets, then given the close proximity of the vendor, the project will save $10K per month in delivery costs.”

The project manager needs to plan to avoid negative risks and capture positive ones.  This is done via the Plan Risk Management Process.  Yes, a small project needs to do this and should regard all time and resources spent as an important investment in the future success of the endeavor.

According to the PMBOK, the plan can include: methodology, roles and responsibilities, budgeting, timing, risk categories, definitions of risk probability and impact, probability and impact matrix, revised stakeholders’ tolerances, reporting formats, and tracking (pgs. 316 – 318).  It’s beyond the scope of this post to define and discuss each of those sections.  However, as a small project considers the Risk Management Plan, there are few opportunities to tailor.  That is, each section is important to consider and define for the project and should be included in the final plan.

Nonetheless, the implementation of Risk Management is where we’ll see some adjustments for the small project.  Stay tuned as I address Identify Risks, Perform Qualitative Risk Management, Perform Quantitative Risk Management, Plan Risk Responses, and Control Risks in upcoming posts.

See you then!

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  1. […] I would be remiss if I didn’t insert a plug for opportunities in this post.  Remember from my last article that opportunities are positive risks, meaning they have the potential to impact project parameters […]

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