Focus on managing real risks, not assumptions

It's important for project managers to be aware of risks. But as Project Mentor Tom Mochal explains, risks should not be mistaken for assumptions, or valuable project time could be wasted.

Each week, project management veteran Tom Mochal provides valuable advice about how to plan and manage projects. Tom first describes a common problem scenario, based on real-life situations. He then offers a solution, using practical project management practices and techniques.

The dilemma
In my recent meeting with Bill, we were putting the finishing touches on his program-definition document, which describes the program that involves installation of manufacturing software in our new plant.

The document was thorough and well executed, but I questioned why so much work was associated with Bill’s risk-management plan. “If there are this many risks to the project, I have to question whether you should even start the initiative,” I said.

“I want to make sure I’m managing the potential risks as proactively as possible,” Bill explained.

“You should be aggressively managing risk,” I agreed. “But the number of risks you’ve identified surprises me. Are you sure all of them are real? It seems that there is a low probability that some of these events will occur.”

Bill explained his logic: “This project is critical to the manufacturing division, and we only have five months to get the new software installed. I don’t want to leave anything to chance. It’s likely some of these risks won’t occur, but I don’t want to overlook a minor risk and then have it come back and hurt the project.”

I noted that it would be difficult for Bill’s team to focus on those risks that actually could have a major negative impact on the program when there was so much time being spent identifying possible risks.

“So what do I do with the low-risk items? Just ignore them?” Bill asked.

I suggested that he identify low-risk items as assumptions instead.

Mentor advice
Assumptions and risks are related—but the difference between them is important. Both of them identify events that are outside the control of the project team and that would have a negative impact on the project if they occurred. In general, events that are likely—those that have greater than a 50 percent chance—to occur should definitely be included in the risk plan. However, if the event has a low likelihood of occurring, or if the potential impact to the project is manageable, it is more appropriate to identify that event as an assumption. Because assumptions have inherent low risk, it’s not appropriate to spend precious project time trying to mitigate assumptions.

In Bill’s case, his risk plan is unfocused because he’s mixing high, medium, and low risks. The better approach is to focus on the real risks—those that are likely to occur and will have a negative impact on the project. Potential negative events with a low likelihood of occurrence should be identified instead as assumptions. For instance, if there’s a low risk that appropriate resources won’t be available, make an assumption instead that the appropriate resources will be available. Of course, it is possible that an event that was initially identified as an assumption might later turn into a real risk. That’s why the project manager should periodically update the risk assessment throughout the project, to ensure that new risks are surfaced and mitigated as events warrant.

Project management veteran Tom Mochal is director of internal development at a software company in Atlanta. Most recently, he worked for the Coca-Cola Company, where he was responsible for deploying, training, and coaching the IS division on project management and life-cycle skills. He’s also worked for Eastman Kodak and Cap Gemini America and has developed a project management methodology called TenStep.

Got project management woes?
Tell us about them. Tom Mochal will answer those that affect the widest number of readers. Post a comment below or send us a note.