Relating Project Risk Appetite to Project Management Activities

John Manfreda has over 30 years of IT experience serving financial services, utility, and public sector clients. His areas of expertise include financial systems analysis, ERP implementation, upgrade and support, IT service management, project and program management, project and program governance, risk and compliance, and assurance oversight. He has spent the last six years as a lead IT auditor assigned to large-scale, strategic IT projects for a Midwest-based United States utility. John has a bachelor’s degree in management information systems, is a Project Management Professional (PMP)® certification holder, and has a CISA certification.

Defining and establishing a risk appetite level for a project, coupled with aligning project management activities to the risk appetite level, is a critical step in successfully delivering a solution from project activities. Determining a project risk appetite and related management activities is often an informal and undocumented process dependent upon the individual work style and risk-taking perspectives of project stakeholders. This article discusses organizational risk concepts related to project risk management and includes guidance for a more formal way to frame and document project risk appetite for aligning project management activities to project goal attainment maximization and negative outcome minimization.

Projects are risky propositions. Leading statistics show that even after the establishment of professional project management standards and practices, over 30% of projects are cancelled prior to completion and over 50% of completed projects will cost 189% of their original estimates (The Standish Group, 1995).   The PMI  2017 Pulse of the Profession® Success Rates Rise: Transforming the high cost of low performance notes that although improvements are being made in this area, more than one in four (or 28%) of “strategic initiatives” failed  and “undefined opportunities or risks” was among …

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