What is the best strategy for reducing risks on projects?

 

In short, stop voluntarily creating the potential for risk events on projects that may not have adequate management resources to ensure opportunities are realized and threats are mitigated! 

Projects are exposed to risks throughout the project lifecycle and they present threats and opportunities for altering the original project plan for scope, schedule, budget and quality expectations as well as for adjusting the project business case for purpose, deliverable requirements and functionality, and the cost benefit analysis for project completion. 

Guides for project management and practice standards for project risk management are available from government funding agencies and from industry advocates and professional development organizations such as the Federal Transit Administration (www.transit.dot.gov) and the Project Management Institute (www.pmi.org).    Managing risks also requires experienced project professionals with demonstrated expertise in the industry domain of the project and with adequate allocation of hours and budget to perform risk management activities.  

Hard risks can be addressed with engineering solutions and added funds to retain schedule goals.  But soft risks require managerial solutions that must be addressed with funds, changes in project management processes and other innovations that mitigate impacts to extending schedule duration and forecasting new milestone dates.    

Organizational processes and internal struggles between managerial silos create risks on projects.  Many of the risks in this category can be managed and controlled by diligently monitoring events and consequences to assure operational initiatives do not place new burdens on established project objectives, management processes, performance metrics and progress to goals.

Here are some examples soft risks:

1. Mitigate project level changes to the project plan/charter.   While continuous change is a common mantra, it is not a license for project governance, and program and project managers to propose and implement unbridled changes in the project scope and requirements.   Decisions for changes must be vetted with rigor tested to assess facts, substantiate benefits, identify the consequences, and the expected benefits.   Mitigation can be supplemented by developing a Plan B for recovery if the outcomes of the change are not achieved.   

2. Mitigate changes to roles and personnel assignments.   Turnover of personnel during a project life cycle can occur due to actions outside the control of the project manager.   While a certain amount of events can be anticipated by monitoring years of service and performance records of assigned personnel, most changes are driven by the work environment created by the organization, project governance, program and project management and the priorities in the company’s providing management, design and construction services.   Mitigation can be supplemented by enhancing project management activities to incorporate cross-training and a succession plan to reduce impacts for transitioning staff in and out of the team.      

3. Mitigate changes in organizational processes and procedures.   Most projects rely upon the organization’s existing processes and procedures as the foundation for project processes and procedures.   As a result, changes in project processes and procedures should be carefully implemented by ensuring the intended benefits of the change outweigh any increase in complexity, management oversight and the duration for completing the transaction.   Mitigation can be supplemented by ensuring project governance is flexible to allow the project to vary from organizational work flows while maintaining the intended accountability for managerial diligence and accountability for compliance with professional standards in the industry and licensing/educational oversight.

4. Mitigate changes created by political influences outside of project governance.   Ideally, political will can provide added urgency, funding, and streamlined regulations/processes to help progress project work.   However, sometimes there are arbitrary project metrics that are committed to that may fall outside the realm of reality.   Mitigation can be supplemented with a robust project communication plan that builds and maintains channels for aligning tactics and strategies between project governance, political officials, news and television media and community influencers.     

In the rail transit domain, the value and duration of projects, including planning and defining requirements, can span 5 years to 10 years.   For megaprojects in this domain, the operating organizations are usually highly bureaucratic.   As a result, the project durations can be longer due to factors that add time and complexity for processes associated with government contracting requirements, securing bonds and insurance carrier support, managing available manpower and labor agreements, coordinating a large quantity of contracts and project participants, monitoring vast interdependencies and interfaces, directing the logistics for work within fixed boundaries, and for managing materials provided by the project to contractors. 

1. Government contracting requirements:  In exchange for funding, government processes and reporting add significant hard and soft costs to contracts.   In the US, these include requirements for union level rates of pay, overall diversity of employees in the company, compliance with safety regulations, use of quality process, security checks on employees and subcontractors, specific percentages of work by designated subcontractors, and US made steel and US headquarter locations.   Risk mitigation includes processes and strategies for interpreting the requirements and the standard for demonstrating compliance.

2. Insurance:   The magnitude of cost on construction contracts affects the expense to contractors for obtaining specified insurance types and liability levels.   The high cost of insurance premiums can limit the number and proposed price for bids on contracts.   In some cases, it may prohibit insurance carriers from offering policies within the contractors bid price framework.   As a result, Owners can be forced to re-bid the contract with a reduced scope by creating several different contracts, which will allow bidders to obtain required insurance policies for the work.   Risk mitigation includes periodic peer reviews with contractors and insurance companies to align procurement plans with the current industry environment.     

3. Manpower and labor agreements:    New construction and job creation create an economic benefit.  However, they may outpace the availability of manpower in the region were the work is located.   As a result, Owners may require contractors to enter into non-binding labor agreements with trade unions to increase confidence that qualified manpower will be available for the work without creating a hardship to existing contracts from contractors competing for qualified workers.  Risk mitigation includes periodic peer reviews with contractors and local labor officials to assess overall labor availability and the projected public and private contract acquisitions.      

4. Quantity of contracts:  The quantity of contracts within a project proportionally affects the level of manpower for direct work and for management and oversight of the work to meet the project’s overall objectives and quality expectations within the established scope schedule and budget.   In addition to increasing the complexity of execution, it also requires more resources for managing interdependencies and interfaces between the contracts.   Risk mitigation includes a well defined and maintained procurement plan that describes the each contract scope, interfaces and interdependencies with other contracts, and the sequence of execution in the project.      

5. Quantity of project participants:   The quantity of project participants proportionally affects the complexity of the projects’ communications management plan, and other essential project management plan actions.    The other actions include establishing baseline requirements, making decisions and resolving conflicts throughout the project lifecycle, and for identifying the acceptance criteria for deliverables.    Risk mitigation includes a well defined and maintained system of current names and contact information for distributing project documents, scheduling and requesting attendance at meetings, and for organizing and managing project records.   

6. Interdependencies and interfaces:    The quantity of interdependencies and interfaces affects the project team’s ability to make schedule adjustments to work around problems and implement schedule recovery to achieve the project milestones dates on the path to project completion.   The higher the quantity, the lower the ability to maintain project progress and dates.   Consequently, the higher the risk threat for missing dates and extending the project duration and for adding soft cost for management staff that is proportional to the longer project duration.   Risk mitigation includes regular discussion of risks at monthly management coordination meetings, project meetings and contractor progress meetings.       

7. Logistics:    The work boundaries of the project and the amount of resources scheduled to work creates and inverse ratio that affects the environment for efficient execution and optimum progress to original scheduled project milestone dates and goals.  At some point, the amount of area required for personnel, equipment, material staging and means and method processes will not achieve planned productivity within the defined work boundaries.    Risk mitigation includes a detailed master construction schedule and integration plan, and a fully staffed and comprehensive construction management and monitoring plan.

8. Materials Management:   While most typical contracts transfer project risks to the contractor, so it is unusual for projects to plan to provide materials to contractors for installation.   When it occurs, the most common execution involves using in-house personnel from the rail transit agency to install, test and commission the constructed product.  As a result, the project creates a material procurement and inventory management plan, which is overseen by the construction manager and executed by in-house personnel.    This arrangement of responsibilities introduces risks that would normally be managed exclusively by a prime/general contractor.   Risk mitigation includes creating a material management plan with detailed processes and procedures  for managing requirements, purchase cycles and lead times, receipt inspection, inventory control, and for warehouse and distribution operations        

TIP:  Conduct a time study of recurring risk management activities and deliverables to estimate the manhours required from supporting staff. 

TIP:  Ensure Agendas for monthly project meetings, monthly contract progress meetings and periodic management oversight meetings include risk topics.

TIP:  Project program budgets should identify separate budget line items and schedule duration reserves that can be drawn down for mitigating and responding to risks.