Different Perceptions of Risk on Projects

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The July Project Management Journal includes an interesting paper highlighting two approaches to understanding risk:
 
1. Risks as facts: Risks are treated as objective, technical, neutral events that can be managed based on the knowledge produced by objective analysis using probabilities and expected values. The outcome is rational decision making.

2. Risks as subjective constructions with multiple dimensions: Risk managers choose the context and perspective they adopt. This allows multiple rationalities to coexist, depending on the values and perspectives of the observers. (This explains why some people find jumping out of an aircraft fun.)

From a project perspective, risks are uncertainties that matter. All estimates about future project outcomes incorporate a degree of uncertainty. This includes the three key dimensions of project management: timing, cost and quality of future project deliverables.
 
The project manager cannot be certain that the estimates that make up the project schedule or cost plan will prove to be correct, or that the project team will create deliverables to the appropriate quality standards. The rational management approach is to assess the risk factors and develop appropriate time and cost contingencies, backed by appropriate reviews and tests to ensure optimum quality. This approach is highly objective and rational.

However, you cannot rely on your stakeholders having the same view as you. If a stakeholder sees your project in a different context, their perspective on risk will be different.
 
For example, if you created a contingency plan using a Monte Carlo analysis, an executive may interpret the plan as a sign you don't understand the project because he or she expects a single definitive result. From this stakeholder's perspective, the precise calculation of a critical path method schedule offers certainty and minimum risk.

The authors of A Guide to the Project Management Body of Knowledge (PMBOK® Guide) have a different perspective, which understands the benefits of 'three-point estimating.' You cannot assume your stakeholder will have the same view.
 
The challenge is to accept that a range of stakeholder perspectives will occur. Stakeholders may derive completely different opinions from the same data.
 
You should anticipate this possibility and adjust the way you package your project information to communicate more effectively and ensure both you and your key stakeholders have a common understanding of the risks and issues confronting you project.

How do you deal with the challenge of managing different stakeholder perspectives on risk?

Read more on risk management.
Read more on stakeholder management.
Posted by Lynda Bourne on: September 07, 2011 11:31 AM | Permalink

Comments

Stella George
Hi Lynda,

I'd like to read this paper, could you give the full citation for it? Perhaps a shout out to the authors in your post would be appropriate too?
thanks,
Stella.

Akin Oni
Ensure each project's risk management (i.e. identification, assessment, quantification, treatment and controls) is robust, inclusive of subject matter experts and transparent so much so that it can be communicated to every stakeholder in an easily comprehensible manner.

Anonymous
Hi Stella, The full citation for the article is Project Management Journal, Volume 42, Issue 4, pages 5–18, July 2011. Here is a link to read more about the journal: https://www.pmi.org/Knowledge-Center/Publications-Project-Management-Journal.aspx. Thanks!

William H Gutches
Risk identification and management is based on the perception of what is anticipated to happen which can affect the outcome of a work effort or project.

This being the case, varying perspectives need to be captured, discussed and agreed upon as these viewpoints may either resolve into one acceptable definition for all contributors or may, in fact, be several unique risks that need to be mitigated and / or managed.

bgbg

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