What is risk in project management? Project management risk is significant because of its lasting implications. By definition, a project is a “temporary endeavor undertaken to create a unique product or service and involves doing something that has not been done before.” Thus, it is reasonable to expect projects to involve a high degree of risk, and statistics support that expectation.
Many organizations do not have experienced project managers and mature project management processes necessary to execute projects effectively. As a result, project risk management capability has become a critical need. Without proper management, an organization’s implementations will not be successful, leading to a negative image in today’s competitive marketplace, likely resulting in a loss of customers.
Project management risk is generally associated with the ability to apply expert knowledge, skills, tools and techniques to project activities in order to meet or exceed stakeholder needs and expectations. Failure to manage project management risk can have the following implications:
- The project may fail because of insufficient management and/or stakeholder sponsorship or support.
- Projects may incur risks that increase exponentially with project size.
- Inadequate sponsorship from leadership places the project at risk.
- Lack of project metrics and management of results may cause projects to deviate off course.
- The project may fail because the staff allocated to the project does not have sufficient expertise in the key project domains, nor are they empowered to make timely business decisions for their user communities. Risk indicators include:
- Specific systems or technologies lack sufficient experience.
- Insufficient staff is allocated to support the team.
- The roles and responsibilities of the project teams are not clearly defined.
- The project team does not receive the appropriate training.
- A collaborative environment to encourage continual communication between team members and business units does not exist.
- A project management strategy has not been fully developed, nor has management or stakeholder support been obtained for the project. For example:
- A steering or executive committee has not been established.
- A project charter has not been developed and agreed upon by all parties involved.
- Executive and stakeholder buy-in has not been obtained.
- The project team may not be fully aware of the requirements of the system that they are delivering. Risks include:
- Team members are not aware of how the system must support operational requirements.
- Team members do not clearly understand interfaces and user requirements.
- Project management metrics and tools have not been developed or are not being actively utilized. Indicators include:
- Realistic milestones and milestone decision points with exit criteria have not been established.
- Cost, schedule and performance are not continuously compared to the initial baseline.
- Performance metrics have not been established with threshold and objective criteria.
Organizations should follow leading practices and develop performance measures to monitor project management risk. These include:
- Develop a project management strategy and emphasize the importance of communication throughout the project.
- A formal project management strategy and management plan should be developed. The strategy should outline the goals and objectives of the project team, roles and responsibilities of team members and functional areas, key decision points, milestones, and the level of effort required.
- Prior to starting the project, management should distribute a project implementation support letter to the entire organization, emphasizing the importance of the project, the leadership role that the organization is taking in the arena, and the cultural or paradigm shifts that are required to ensure continued success.
- A formal project team charter should be developed and agreed upon by all project team participants. Project team members should keep their respective business units updated on the implementation.
- The project scope should be finalized and should include cost, schedule, performance objectives, user requirements, defined performance metrics (threshold and objective) and key performance indicators (KPIs). The project steering committee should approve any deviation in the scope of the project. Should such approval be granted, an updated acquisition program baseline should be developed.
- Assign capable and empowered experts in the subject matter to the project teams.
- Project teams should be well-integrated with business unit representatives, with scheduled meeting dates, plans of action and milestones (POA&M), and specified deliverables. Additionally, a project team member with technical knowledge should be assigned to assist the integrated product teams in realizing the technical requirements of the implementation.
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