The Project Manager’s Relationship with Risk

/in /by

In a recent LinkedIn Live session, a viewer asked, “How did you learn to embrace risk-taking?” A project manager isn’t the risk-taker in a project—risk is inherent in every project. However, it’s true that project managers must embrace risk. Project managers need to understand the risks within their projects as well as what risk management entails.  The project manager also helps the entire team understand the project risks, strategies, and risk management approaches. Here are some things project managers can do to manage project risks effectively: 

Alert stakeholders to risks. Part of the definition of a project is “to create a unique service or product.” Uniqueness means risk will be present, so project risk comes with the territory. One project manager duty is to ensure that the organization fully understands those risks. The project manager is like the “risk consciousness” for the business. For all the risks identified in a project, the project manager should alert stakeholders and ensure that everyone understands the strategies for handling the risks should they occur. 

Watch for risk triggers. Risk triggers are typically conditions that arise prior to a risk coming to fruition. Watching for them is critical, because they provide early warning to prepare for taking action on the issue. Potential risk triggers could be delays due to busy personnel; delivery delays caused by COVID restrictions, or ships being stuck in canals! When a risk trigger occurs, jump in to update and review associated risks, impacts, and response activities. That way, you’ll be ready to handle the issue when it occurs.

Create a risk management culture. Many risk plans are written and then filed away to gather dust. A project manager can ensure this NEVER happens by embracing and promoting risk management. To regularly draw focus to risks, review upcoming risks in project briefings and status meetings. This integrates risk management into your project culture.

Keep the risk plan up to date. As the project progresses, things change. Update your risk plan accordingly.  

Manage risks your sponsor considers acceptable for the project. The job of the project manager is to ensure risks are understood – not to stop project sponsors from taking them. Taking risks is part of project delivery and a significant part of staying competitive in a quickly changing marketplace. Roll with it – and report status frequently so everyone understands where your project lies relative to its risks.

For more about risk management, check out Bob McGannon’s Project Management Foundations: Risk course.

Photo by Anthony Da Cruz from Unsplash

Managing Project Contingency Funds

/in /by

Contingency funds come in handy for mitigating project risk and handling unexpected issues. How much contingency funding do you need? And how do you manage it?  Here are some tips:

Consider the cost of risk responses. After creating your risk management plan, estimate how much money you need to address the project’s high-probability risks. If the project has few risks, you might do this for medium-probability risks, too. The total cost for addressing risks is your initial estimate for contingency funding. Then, work with your sponsor to adjust and recommend contingency funding for the project based on the overall level of risk present in the project. (For example, a project might have few medium to high probability risks, but scads of low probability ones. In that case, you might add contingency to cover low probability risk that do come to fruition.)

Align contingency funds with the project business case. Organizations usually have required payback times, cost savings or profit improvement targets that must be met for a project to be approved. Calculate the impact of contingency funding on those financial targets. Ideally, the project will still satisfy business case criteria after the addition of contingency funds to the budget. However, increased costs for handling risks or other unexpected costs may mean the project doesn’t satisfy those business criteria. If the contingency funds needed jeopardize the project’s business case, revisit the project approach and costs, or reconsider whether to pursue the project. 

Determine who can release contingency funds. Before the project gets going, decide when contingency funds will be released, who authorizes them, and in what circumstances they will be released. Traditionally, the sponsor releases contingency funds. However, giving the project manager access to these funds when specific risks occur can increase efficiency and reduce the impact to the project. Document the decisions you make regarding how contingency funding will be released, so you don’t encounter roadblocks accessing the funds.

Track and return funds to contingency when possible. Keep track of the contingency funds already spent and still available in your contingency budget. If parts of your project end up costing less than planned, you might recategorize those unspent project funds to replenish your contingency budget. 

For more about contingency, check out my Project Management Foundations course.

Managing Unacceptable Project Variances

/in /by

Projects never run exactly according to plan, so project variances are inevitable. To keep your projects on track, you need to take action when variances are about to become – or already are — unacceptable. Here are some tips for managing variances.

Respond quickly. Small variances in your schedule or costs can grow large before you know it. Don’t wait for the next project report to respond. As soon as you see variances, talk to your team to find out what’s going on. Maybe the accounting department made a payment earlier than planned to score a vendor’s price incentive. Or a key team member was out sick a few days. When there isn’t a reason for the variance, focus on what’s driving that variance and monitor it closely. If necessary, recommend changes to your sponsor for getting things back on track.

Focus on scope. Thoughtful examination of project scope often uncovers opportunities for saving time and cost. Break scope down into individual requirements and analyze each one’s business value to identify candidates for reducing scope. Often, the value a requirement provides isn’t worth the cost to produce it. These requirements are easy targets to reconsider when you’re looking for ways to reduce project variances.

Scrutinize resourcing. Seeking the best resources for your project typically yields the very best results. However, “very best” might not be necessary–or wise–if those resources create unacceptable cost or schedule variances. The best resources are usually the most expensive, especially with contracted personnel. Availability issues with your top internal resources can lead to schedule slippage. One way to save time and money is to review your resourcing plan and choose people who are more available who can produce deliverables for senior team members to review. For your contracted resources, see if less expensive alternatives can be used—again with senior internal staff reviewing the deliverables they produce.

Increase reporting. Project variances capture the attention of senior stakeholders. They expect you to live up to your title of project MANAGER! Immediately inform your stakeholders of any project variances so they don’t hear about the issue from others. Increase your report frequency to keep interested stakeholders abreast of how you are addressing the variances.

For more about managing project variances, check out my Project Management Foundations course.

What qualifies as a project?

/in /by

Photo by Lala Azizli on Unsplash

During a recent LinkedIn Live session, an attendee asked “What actually qualifies as a project when summarizing project management experience? Could it be creating a lesson plan or procuring items for a charity auction?” 

According to the Project Management Book of Knowledge (PMBOK®), a project is a temporary endeavor undertaken to create a unique project, service, or result.

Let’s dig a little deeper to see what qualifies as a project.

A project:

Satisfies a set of requirements. According to PMI®, projects create a unique product, service, or result. That unique result needs to satisfy some established requirements. Without requirements, you won’t know when your endeavor is complete. Although you can launch an Agile project without fully defined requirements, you still need some high-level requirements to get started.

Requires a sequenced schedule of activities. To qualify as a project, the project goal needs a purposefully sequenced series of task. Otherwise, you’re just working on your ongoing to-do list, which doesn’t qualify as a temporary endeavor.

Considers scope, time and costs. Fundamental to qualifying for projecthood, a project must produce a result that’s at least partially defined when it starts (scope), work with a schedule of tasks (time) and work within a budget (costs.) In other words, scope defines the project result; the schedule of tasks completes the scope within a timeframe, this making the project temporary; and people and other resources (which incur costs) are needed to complete the tasks.

You could argue that only two of these elements (scope, time and cost) are required.  Occasionally, a project won’t have a prescribed deadline or budget is not a major factor. If you’ve run projects that only require management of two of these three elements, you aren’t truly an experienced project manager. 

Produces benefits. A project delivers a unique product, service, or result; and it takes time and money to do so.  To justify that time, money, and effort, the result has to produce some kind of benefit to the organization.

Given these conditions, does creating a lesson plan or procuring items for a charity auction be considered a project? Yes!

For more about project basics, check out my Project Management Foundations course.