Effective Risk Management at Project Level using Risk Universe and Project Level Risk Profiles

1. PMI Delaware Valley Chapter Dinner Meeting Sept. 17, 2009 Chetan Gautam, MBA, PMP President, globe 1, inc. Project management, strategic management & risk management consulting cgautam@globe1management.com P: 215-262-0557 | f: 1-888—749-8519 Project Risk Management in Current Business Environment

2. IT PMs Intentionally Opt-out of Risk Management Globe 1, Inc. 2 “IT projects seem to be more problematic than other types of projects, with a particularly high rate of failure. Despite well-established best practice project management processes, project managers appear to be ineffective in the light of such failure. Risk is any project-related event, or managerial behavior, that is not definitely known in advance but has the potential of adverse consequences on a project objective (PMI, 2004). Project risk management claims to enable project managers to effectively manage risk and minimize the adverse influence of risk on the project outcome. However, we have found that IT project managers often do not apply a process to manage risks. The reasons for this vary. Nevertheless, the evidence behind this phenomenon is very scarce, often descriptive, and inchoate.” (Kutch & Hall , 2009 , “Rational Choice of Not Applying Project Risk Management in Information Technology Projects”, Project Management Journal, Volume 40, Issue 3)

3. Reasons for Opting Out Globe 1, Inc. 3 Lack of time Problem of Hindsight Seen as No value-add/or little value add Lack of skill-set Ownership Problem of Cost -justification Lack of tools Too Complex Risk Culture is Missing Politics Missing Framework “Machismo – Wild-Wild West”

4. Challenges in Current Business Environment Rating agencies & regulators expect well defined risk management processes implemented across enterprise Businesses must: Cut costs to maintain their competitive edge Re-strategize to exploit both short-term & long-term goals Prepare for further changes in regulatory environment (finance, insurance, healthcare and Pharma industries) 4 Globe 1, Inc.

6. Strategic projects must be completed in months not years

7. Integrated IT systems cannot be built overnight to support changes in strategic direction

9. Expectations from PMOs/PMs Partner with business in improved risk management at implementation level Quickly develop a roadmap that would translate strategy into feasible projects, with a focus on Risk Communicate in a timely manner, the threats, opportunities and issues that impact the achievement of strategic goals Time is of essence, no tolerance for delays, just get it done! Help build a “Risk Culture” in the long-term 7 Globe 1, Inc.

10. Project Management Challenges as Usual Stakeholders expect it all: Timeliness Best quality Uncompromised Scope Low Costs Lack of well established PM methodology, processes, tools, to meet business needs Lack of understanding of PM best practices, methodology, and processes across the organization 8 Globe 1, Inc.

11. A Project Manager’s Promise Globe 1, Inc. 9 “Results Orientation” “Measurability” “Self-Motivation” “Get things Done!” “Dependable”

12. What PMs / PMOs could be doing wrong? Not adapting or making necessary changes to meet the new expectations Not defining a formal risk management process that is supported by tools & techniques On the contrary, making the process too complicated, rigid or time-consuming Making risk-register a project-level deliverable not tied to enterprise risk management database Not aligning project & strategic risks Keeping risk management optional 10 Globe 1, Inc.

13. The Ideal Risk Management for PMOs Step 1 - Define Project Risk Management Methodology Step 2 - Identify methodology maturity levels Step 3 - Start with “must-have” deliverables (level 1) Step 4 - Perform Pilot Implementation Step 5 - Improve & implement in all projects Step 6 - Repeat steps 4, 5 and 6 for next levels 11 Globe 1, Inc.

14. Challenges for PMs Methodologies cannot be built and institutionalized in a day! Contractor PMs depend on Client’s methodology, which may or may not exist Scaling and integrating Project-level risk management to Enterprise-Level risk management Finding time to do Risk Analysis Stakeholders’ and PM’s perception of risks may differ 12 Globe 1, Inc.

15. Build a Risk Universe Reusable inventory of common risk categories & events 13 Globe 1, Inc.

16. Benefits of Creating a Risk Universe Globe 1, Inc. 14 Facilitates reusability, hence reduces time It is independent of project size Can be scaled and customized for industries & project types if required Can be used in strategic alignment of risks Is portable and can be carried from client to client Brings perspective to project environment Facilitates risk identification Basis for building risk identification questionnaires

17. Building Practical Project Risk Profiles Globe 1, Inc. 15 Inventory of risk events & situations aligned with schedule

18. Benefits of Schedule-Aligned Risk Profiles Report and focus attention on risks that are closer Monitor , manage and report risks as part of your project progress reporting and status reporting Manages perception of risky projects as risks expire with time Allows project comparison by their diminishing riskiness Allows you to identify risks and response planning as using progressive elaboration technique 16 Globe 1, Inc.

19. Other Effective Risk Management Techniques Identify Strategic Goals, Sponsor Expectations and Project Dependencies, and keep them in sight at all times Interview stakeholders early in the project life-cycle about potential risks Create a “what if” questionnaire, and keep updating it for different projects Identify critical-path tasks 17 Globe 1, Inc.

20. Essential Techniques Tracking “likelihood” and “impact” of a risk is good, but what good is it without knowing the “urgency”? Don’t forget the residual risk! Communicate more often Be consistent and set the right tone at the beginning Hindsight is 20-20, document the lessons learned 18 Globe 1, Inc.

21. Primary Level Risks Globe 1, Inc. 19 Absence of: Project Management and Risk Management Methodology Trust in the system Leadership support Strategic alignment and vision Understanding & Documentation of Roles & Responsibilities Wrong team fits (who is the weakest Link?)

22. Summary –Project Risk Management Globe 1, Inc. 20 Do not escape from Risk Management – Projects and your success depends on it! View Risk Management as a proactive method that forces involved parties to guarantee project success Bring sponsor’s focus on project priorities & impacts Justify delays or variance during executive reporting Ensure achievement of corporate strategic goals and objectives Help clients maintain their competitive advantage

23. Questions Globe 1, Inc. 21 Project Risk Management Chetan Gautam, MBA, PMP cgautam@globe1management.com P: 215-262-0557 | f: 1-888—749-8519