Risk Analysis: Art or Science?

Andy Jordan is President of Roffensian Consulting S.A., a Roatan, Honduras-based management consulting firm with a comprehensive project management practice. Andy always appreciates feedback and discussion on the issues raised in his articles and can be reached at [email protected]. Andy's new book Risk Management for Project Driven Organizations is now available.

  Estimating   Risk Management  

When I am asked to undertake an audit or assessment of a client’s project or program, the risks are one of the first items I look at. I feel they are one of the best ways to gain insight into how well the project is being managed. A review of the risks will let me know how thoroughly the project was assessed, how actively it is being managed and how engaged the team is with the work that is being done.

I see significant variation in the quality of risk management as I am sure you can imagine, but one element that rarely seems to be done well is the initial analysis of risks. Analysis establishes the exposure the project is facing; it is critical to creating an accurate baseline for ongoing risk management. I want to look at why risk analysis is often ineffective in more detail in this article.

The basis of risk management—with many problems
Risk analysis is, to me, the cornerstone of effective risk management. Risk identification is a fairly straightforward exercise—most teams develop an accurate list of at least the major risks the project is facing. However, the ability to accurately assess each of those risks is much more difficult. It requires an understanding of both the project in general and the specialized area the risk impacts, and it also needs an ability to foresee how the project can be impacted …

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