The Money Files

Project risk management is a team effort. As the project manager it might feel like you are taking the lead role, but overall it shouldn’t be a one-person job. You need to work together to identify the risks on your project and do something about them.

You can’t work as a team if you don’t have a team. So, you should identify your risk management team as early as practical in the project. That’s what textbooks would recommend, but in my experience you don’t always know who is going to be the right person to be the risk owner for a particular risk until it makes it on to the risk log – then you need that person on your team.

However, there are some common roles you will definitely need involved in risk management. Identifying who is going to fill those roles will save you time later. When a risk is uncovered, you don’t want to be waiting around trying to work out who is going to look at it. You want to know, broadly, who is going to help you deal with it.

Let’s look then at who does what in risk management on a project. These are the people you need to inform about the risk management processes and get them lined up to act when something is brought to your attention.

Project manager

You might think this is obvious – many of you reading this will be project managers. But if you are an IT workstream lead or a Scrum Master, or Product Owner, then maybe you will be working alongside the project manager.

The role of the project manager is to create the risk management plan. The risk management strategy is likely to be set by the Project Management Office, but you might need one specifically for your project. It is more likely that you’ll take the risk management policies for the business and the PMO and make them actionable and meaningful for your project.

Another role for the project manager is to update the risk log. Unless you have a dedicated risk manager working alongside you, that job falls to the PM.

Finally, the project manager should take a role in the governance of risk. That involves ensuring risk management actually happens and that people take the process seriously. They should know what the process is and follow it. You can check that there is enough attention being paid to risk overall and provide oversight. For example, make sure you have risk management as a standing item on your project board agenda.

Project sponsor

Second, we have the role of the project sponsor. They may not take a hands on role in doing mitigation actions (although they might, depending on what is required). However, they are going to be a huge influence on how risk is managed.

The sponsor will set the risk appetite for the project. That means they are accountable for the risk profile of the project (making sure it isn’t riskier than they would like) and ensuring it fits within the risk appetite for the business overall. 

The sponsor also acts as the escalation point for the team. They are able to resolve risks that the project manager and team can’t. And if it needs to go even higher, the sponsor is the person to do that.

Suppliers

Next we have suppliers. This is shaping up to look like a list of people who are involved in your core project team and project board, and that is not a coincidence!

Suppliers and the work they do also carries risk. They have responsibilities around risk management, namely making sure that they flag anything important to the project manager. They may maintain their own project risk log, but they should also be passing up significant risks to the project manager.

If a supplier tells you that their work is creating no project risk and there’s nothing for you to be notified of, be very suspicious! That to me would sound like someone who doesn’t know what risk management is or what they should be doing.

Many risks relating to your supply chain are going to carry a financial risk. For example, if the supplier can’t source the correct parts for your machine, then you’ll have to get them elsewhere at a higher cost. Make sure you factor in risk management plans for supplier risks because they could leave you significantly out of pocket.

Project team

Your core project team are essential people to work with you on risk management. You’ll involve them in risk identification at the beginning of the project and throughout. You’ll rely on their expertise to put together risk management plans and own the actions. You’ll need them to help you spot new risks or to deal with risks that become issues.

The day to day risk management activities are going to be carried out by the team.

Project Management Office (PMO)

Before you get too far into a project at a new place, talk to the PMO. What they expect you to do for risk management is going to follow the normal pattern: identify risks, manage them, report the big ones, but there might be specific processes or templates they expect you to use.

You might also be subject to internal audit or project assurance. The PMO may get involved in this and it would be natural to expect them to see your risk logs as part of any review.

The PMO’s role isn’t all about governance and holding you to account. You may also be able to draw on them for support. Sometimes project coordinators sit within the PMO and can be ‘loaned out’ to project managers for project admin or support tasks. This could include coming to risk meetings to take notes, updating the risk log, chasing team members for updates and things like that.

In Summary…

Think about who you are going to need for risk management on your project, just like you think about what resources you need for every other area of your project. Identify the types of people who will need to know about the process. And then involve them early.

Let them know what you expect of them and what the process is going to be. The earlier you do this on the project, the easier you will find the later stages of risk management because everyone will know what the whole thing is about.

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There are different types of project cost – your budget isn’t made up of one big lump of cash. Although it can sometimes feel like that!

Understanding the different types of project cost is helpful because they help you review the different categories of spend. You can use mindmapping to check that you haven’t left out any budget items.

The infographic below shares the 5 different types of project costs that you should consider for your budget. However, what it doesn’t make clear is that the project cost categories overlap. You can have fixed direct costs and variable indirect costs, for example. Sunk costs remain sunk!

Within the different categories you can break down your budget even further. For example, cost of quality might be something you consider for your budget formulation, but it could be a fixed, variable, direct or indirect cost, depending on how you are going to build quality into your project.

In this instalment of What’s New In the PMBOK Guide®-- Sixth Edition, we’ve made it to the sixth and final process in Project Resource Management (see here for Plan Resource Management, Estimate Activity Resources, Acquire Resources, Develop Team and Manage Team).

This is a brand new process. The old section on Resource Management focused purely on managing human resources, so this new process is a response to the fact that the Knowledge Area is now far broader and includes other types of resources.

Control Resources Process

This is the sixth process in the Knowledge Area. We’re in the Monitoring and Controlling process group.

This process is all about ensuring that resources are assigned to the project effectively and that they are used appropriately. That includes looking at actual utilisation of resources against what was planned and taking action as necessary to course correct should that be required.

Inputs

This is a new process, so all the inputs are new! And yet not new. They are things we have seen time and time again across all the other processes. Here we go:

Project management plan: This will include the resource management plan, which is your baseline statement of what resources will be required.

Project documents: this could include the issue log, lessons learned register, schedule, resource assignments (however you record them, in your software, for example), resource breakdown structure and resource requirements and risk register. All of these help you understand the reality of what is going on so you can take appropriate action.

Work performance data: for checking what has gone on. This could include timesheets, for example.

Agreements: this vague term means things like agreements for resources made with line managers of the people involved, agreements around overtime worked or extra hours needed.

Organisational process assets: these turn up all over the place. In this process, the OPAs could be policies around resource assignments and task allocation, the process for escalating issues when work doesn’t go as planned and lessons learned.

Tools and Techniques

As this is a new process, there is nothing to compare to.

Data analysis is in there as a technique. This broad term includes different ways of reviewing what the resource information and working out what might be needed. For example, performance reviews and cost benefit analysis.

Problem solving is another tool. This isn’t rocket science. If resourcing on your project isn’t going well you need to solve the problem.

You might need to do some negotiating and influencing to secure resources or work with your colleagues to resolve resource issues. Interpersonal and team skills are core to being able to monitor and resolve problems.

Finally, your project management information system is a tool to help. If you use your project management tools for timesheets or resource allocation, then you can see how this would be useful. You might be able to get resource allocation reports out of your software. Reports like utilisation, over/under resourcing could be very useful.

Outputs

Again, nothing to compare to as this is a new process. But it all makes sense. I’m not actually sure why this process is new. It feels like it should have been around for a long time.

There are four outputs:

• Work performance information: information on how work is going so you can look back on what was planned.
• Change requests: like many processes, once you’ve done it you might end up with a change request. That could be for a task to be allocated to another resource, to change the timescale of a task due to resource constraints or something similar.
• Your project management plan: because you might need to make changes to the resource management plan, and baselines for cost and schedule.
• Project document updates: this catch-all covers basically everything else. Whatever you need to update as a result of your monitoring and controlling activity, you can. For some clues around where to look, common documents that might need updating include the resource breakdown structure, resource assignments, risk and issue log and your assumptions log so you can track any new assumptions that you have had to make as a result of tweaking the work.

And that is the end of the Project Resource Management Knowledge Area!

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So often when we think about benefits, we think about the ones that relate to money. ROI, NPV, IRR and so on are often what stakeholders care most about.

But not all stakeholders. Sometimes the impact on the business or the customer is more important, or at least equally important, as the financial return.

In this video I discuss 3 softer project benefits. Don’t get me wrong: you can talk about these in monetary terms if you want to, but sometimes looking at other measures is actually more powerful.

There is more information about using these benefits in project selection in this video.

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What are the steps for estimating?

Each business will have a slightly different approach to how to do project estimating, and your PMO will likely have a methodology that you are expected to use. For budget estimating, it maybe the corporate Finance department that sets out how estimates are supposed to be calculated.

However, back in the real world, I meet lots of project managers who don’t have the benefit of a fully-documented helpful process for how to do estimating, so in this article I’ll look at the 4 steps for working out your estimates to give you a headstart!

What is an estimate?

First, it’s worth us defining what an estimate is.

An estimate is a quantitative assessment of a likely outcome.

You will find far more detailed definitions of estimates elsewhere, I’m sure, but that does for me.

On projects you have to do quite a lot of estimating, for example:

• For task duration
• For task effort
• For expenditure
• For benefits.

Let’s look now at the 4 steps of project estimating. Again: if you have your own corporate methodology to follow, use that or you risk getting into trouble with the PMO! But in the absence of anything else, this 4-step approach is as good as any for getting the basics right.

Step 1: Plan to Estimate

The first thing to do is make a plan. As with so many project management techniques and processes, you need a clear idea of what you are supposed to be doing before you actually do it. This step is where you establish your estimating plan.

That sounds far grander than it really is. It isn’t a lot of work, and once you’ve estimated a couple of projects you’ll find you can do this step almost automatically, with very little effort.

Work out:

• What techniques you are going to use to do the estimating (it’s also good to know why you are using those techniques so you can justify that you chose the best approach for the job)
• Who is going to contribute to putting the estimates together.

You’ll also need any other documentation about estimating approaches or corporate or PMO standards that you have to adhere to. This all provides input into how you are going to create your estimates and helps you come up with a solid plan for how to approach the task of estimating.

Step 2: Create the Estimate

This is where you create your estimate. Basically, you use the techniques that you identified in your planning step to come up with your estimates. Work with your team to think about the resources, budget and time that you need. Use the tools you identified, and the guidance from your company to create the estimates.

I’d suggest you don’t do this by yourself, how tempting it might be. Hopefully the techniques you identified in Step 1 will recognise that it’s better to work collaboratively for estimating. Different opinions make a difference and you’ll get a better quality estimate – hopefully you chose to use techniques that take advantage of this!

Step 3: Manage Estimating

Here we manage the estimates. You’ve input your estimates into your budget or schedule and you are using them on the project.

However, you want to make sure that they are maintained and managed as the project progresses. This means you could be revising them appropriately as the team do the work, making sure they still accurately reflect what you think is needed on the project.

The most common way to do this is to compare your estimates to your actual figures as you go, and then tweak the upcoming budget figures, schedule or resource allocation appropriately to take account of what you are learning about progress on the project so far.

Step 4: Improve Estimating

This is where you apply continuous improvement principles to the way you work out your estimates. You could argue that this is an optional step – it doesn’t help you manage your current process – but I don’t think it’s too much to ask that you do this on all projects, all of the time.

You’ve learned from your experiences on this project, so take those lessons and look at how you can improve estimating on your future projects.

Calibrate your models, tweak your techniques and do any other changes necessary as a result of what you have learned on this project. This may mean you have to feed information and your experiences back to the PMO or Finance team so that they can take your feedback into account and make the required changes (or not). Still, even if you aren’t in control of the templates and models you use, it is good practice to try to help your company improve its processes where you can.

Those are the 4 high level steps for creating an estimate. See? It wasn’t so bad. Personally I think the planning stage is the hardest, because it involves thinking instead of just diving in. The rest of the process is all about using the tools you decided on and then working with them throughout the life cycle of the project.