The Inherent Risk of Avoiding Risk

 

By Mike Adams, PMP®

President Elect - PMI Otowi Bridge

Happy Holidays Everyone!

Risk avoidance can be either a risk response strategy, or a project land mine, depending on how it is performed.

Page three hundred forty four of the Project Management Body of Knowledge (PMBOK) Guide, fifth edition explores risk response strategies, and the first one listed is risk avoidance.

In this context, a risk has already been identified, analyzed and explored. The project team is fully aware of the risk and its’ potential. The team actively takes steps to either eliminate the threat, or nullify the impact of the risk on the project. This is solid project management, and a desirable way to approach risk avoidance.

I have, however, observed another form of risk avoidance, which takes place much earlier in the project planning phase, and which can be catastrophic. Many people experience risk identification, analysis and management as resource intensive and unnecessary. One individual told me, “…no, you don’t engage in risk management until a risk has been triggered. Prior to that, you focus on planning, executing, and closing your project.”

From this perspective, risk analysis and response planning aren’t worthwhile activities in the project planning phase. In asking some PMs about their thoughts on risk management, I discovered that it can be perceived as a waste of time, or simply overwhelming and convoluted. One PM said, “I like the idea of risk management, but risk conversations tend to spiral out of control. They are not productive.”

All of this behavior falls into the category of a different kind of risk avoidance, where the PM, the management and the sponsor avoid engaging in robust analysis of possible risks and response. I’ll admit that the avoidance saves a bit of time upfront, and even sidesteps some stress during planning stage.

In the end, however, it is a high stakes gamble, where the PM says, “The only real risks to this project are small, and easily adjusted for. If a risk is big enough that it requires planning, it’ll be too big to deal with, and will render the project irrelevant.” This strategy ignores the possibility of less-than catastrophic events, and the impact they might have on important projects.

I have a relative, who is a skilled mechanic. He is perhaps the most skilled mechanic I’ve ever met. I have seen him accurately diagnose car problems by simply listening to the car idle for a few seconds. He is likable, skilled, and driven. Many years ago, he decided it was time to start his own repair shop. He had been in charge of a shop for years, had balanced the books, participated in marketing, and knew how the business should run.

He had accrued a substantial savings and found a shop for sale, which he purchased. He was marvelous too. Clients were happy with his service, his employees enjoyed working for him, and his future looked bright. There was nothing to stop him, except a lack of risk analysis. It turns out, the person who sold the shop to him did so, because he knew the city was planning to tear up the street in front of the business and replace utility infrastructure. The construction project was a six month project, and my relative lost everything. He was devastated, and had to move his whole family in with his in-laws.

He did recover from the incident, but it made for a stressful, trying and humiliating experience. Most importantly, however, it served as an example of what can happen, and how far the impact of a project failure can reach if the thorough and detailed risk analysis is omitted.

I have certainly experienced problems as the result of meager, or non-existent risk analysis, but nothing that approaches the extent of impact and difficulty that my relative experienced. I’ve had to sacrifice twenty hours over a Saturday and Sunday in order to mitigate a risk after it was realized, but never have I lost all of my savings.

A couple of months ago, I participated in a half day, advanced risk analysis workshop. I’ll work on a follow-up article where we can explore the details of what I learned in that workshop. It was really interesting. In the meantime, please do share about your experiences with the following questions:

What are some problems that you’ve experienced due to a lack-luster risk analysis?

What did you learn in the process?

What were your reasons for not engaging in risk analysis?

I look forward to your responses. The comments on this sight are incredibly insightful and thought-provoking.