Project Management for Small Business: Project Plan Risk Analysis

If there's one thing that’s constant with all projects plans, it's that none of them have more than 10 risks. In fact, many project plans start with the plan used in the last project, and carry existing risks forward. The risk carryover is pretty universal, it often happens in multi-million dollar projects undertaken by huge companies.  In project management, risk analysis is usually an afterthought.

Why don't project teams spend more time on risks?

• Project managers feel that if they dwell too much on what could go wrong, and expose real risks, their project will get cancelled.

• Project managers believe risk analysis us unnecessary because they can overcome any obstacle.

• Project managers have the attitude that risks are outside their control. Therefore, why dwell on them?

I attended a project management seminar a few years back on the topic of risk management. The speaker had us watch a short segment from the Deadliest Catch series. Deadliest Catch is the show where fishermen brave treacherous elements in very rough seas to harvest delicious King Crab. After the clip, the leader of this seminar then had the participants, all project managers, spend a few minutes identifying as many fishing risks as possible.  All the teams identified at least a dozen risks, and some teams identified quite a few more.

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I recommend the Deadliest Catch approach for project risk analysis. The project manager should not just come up with the risks herself. Instead, the person leading the project should assemble the entire project team, explain to them all risks involved with the project.  This explanation should include both internal and external project factors that could go wrong.  A good project manager will also give their team an opportunity to think of additional risks.  Guidelines for the types of risks that should be considered are:

• Project staffing: what if you lose a key team member?

• Funding risks: are there risks to funding the project through the whole lifecycle?

• Acceptance/adoption risks: what if the customer doesn't like the solution?

• Technology risks: does the team know enough about the nuances of the technology to ensure no significant obstacles will compromise the project?

• Market risks: if the project is dependent on market conditions, what changes in the market could impact the success?

• Scope management: is the project scope fixed or is it possible the scope will grow beyond what the team can deliver within time and schedule?

• Time to complete: has the project scope been thoroughly analyzed or is there a risk the project has been underestimated?

After you go over the risks that you have found, ask each team member to take fifteen minutes to develop their list of risks. You'll be surprised what they come up with. Write all of the risks on a white board. Eliminate risks involving force majeure and other things outside of your control. Next, classify the remaining risks into those that can be mitigated and those that can't. Lastly, classify risks by likelihood of occurrence: very likely, somewhat likely, unlikely.

This analysis is a great starting point for your risk plan. You will inevitably come up with some other risks; and conclude that some risks from the team should not be included, but if you use this risk plan, you’ll have a great starting point.

The next step in risk analysis is to develop your mitigation plan. To develop mitigations, concentrate mostly on those risks that are very likely to occur. Consider those that are somewhat likely next. If a risk is very likely, then you must have a plan to mitigate it.

For example, if you have a key employee on the project that you feel is not fully committed to your business, you should put a stay bonus in place that is paid when the project is completed. If you have an acceptance risks by the customer, you could add an early pilot to the project so that you do not go too far before validating and refining the product. If the scope or schedule of the project is not firm, add some extra time and budget to the project to compensate.

If you find that you have very likely risks with no mitigation plans, you should seriously consider whether you should even go forward with the project.  Don't be like the young Johnny Cash. Things don't just sort themselves out; analyzing and mitigating risks are part of being a good project manager.