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Have you been told that risk management add cost?
In your practice have you been told that doing risk management add cost to the project?

What was your response?

Did it clear the argument?
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It is obvious. Everything that is an activity inside a project add cost. It is not a question to be performed from somebody that could argue is a professional in her/his field.
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2 replies by Sergio Luis Conte and Vincent Guerard
Mar 13, 2017 10:12 AM
Vincent Guerard
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So I gather You never face that question.
Jul 18, 2017 8:25 AM
Sergio Luis Conte
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Vincent, I am not saying that you are that person. Sorry if you understand that. My english is not good. I faced this type of questions from top management when I tried to implement quality mainly in fields like software. What I tried to say is: stated in that way, it has no sense. If you add activities you always add cost. As everything in the life. Any type of cost. With that said I ever say what my grandmother said: "prevention is better than cure". And I have (and I think lot of people have) lot of examples. With those examples on hand I was successful to implement quality environments (mainly quality assurance) inside all type of organizations.
Mar 13, 2017 8:01 AM
Replying to Sergio Luis Conte
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It is obvious. Everything that is an activity inside a project add cost. It is not a question to be performed from somebody that could argue is a professional in her/his field.
So I gather You never face that question.
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1 reply by Sergio Luis Conte
Mar 13, 2017 2:15 PM
Sergio Luis Conte
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My assumption is you are talking about project risk management (not organizational risk management). If I am right then it is hard to me to imagine that somebody can ask this quesion. In fact, the only thing that is natural to all project stakeholders is to talk about risk and issues. And each activity inside a project has cost (any type of cost) associated.
Like any other value added service, such as project management, construction management and independent engineering consultants, it can increase soft cost on a project. But these services have a proven net benefit to controlling hard cost and schedule commitments on a project. Risk management is a service with the distinct process objectives for avoiding unplanned costs and schedule impacts by mitigating threats from project events and for implementing reductions to planned costs and schedule durations by undertaking opportunities for improving project execution. Only the most unusual of clients would ever ignore these value added services and risk a loss in funding or a project project failure.
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1 reply by Vincent Guerard
Mar 14, 2017 8:44 PM
Vincent Guerard
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It is in my line of thinking, risk management don't really add cost, because it avoid unplanned one!
Mar 12, 2017 3:46 PM
Replying to Vincent Guerard
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Once the process is accepted, cost can be identify easily, and eventually cost saved.

What if people have yet to agree and is perceived as a pure cost, how have you convince people of the plus value of risk management ?
I’ve demonstrated the value of risk management by showing people concrete examples they understand. Here’s an example for the IT field:

Task: Purchase 50 HP 800078-S01 PROLIANT DL380 G9 servers (total cost = $400,000 USD)
Risk: The servers might not meet the needs of all internal customers in our specialized environment, and customers will not be able to perform their critical tasks.
Risk Mitigation Strategy: Purchase 2 servers, add them to our environment, and let customers perform intensive tests on them for two weeks. If customers verify the servers will meet their needs, purchase the remaining 48 servers.
Risk Cost: $16,000 USD, and the creation of a new ‘Server Testing’ task with a 2 week duration.
Possible Cost Without Risk Management: $400,0000 USD wasted on servers that don’t meet customers’ needs, widespread delays across the organization as a result of customers not being able to perform their work (resulting in millions of dollars in lost labor and opportunities), an estimated 6 additional weeks needed to find servers that will meet customers’ needs, a 25% surcharge added to cost of new servers to cover expedited processing and shipping, very irate customers.

I then ask risk management opponents if, should they choose not to implement risk management, they are willing to assume personal responsibility for the possible costs should the risk occur. No one has ever said 'Yes'.
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1 reply by Vincent Guerard
Mar 14, 2017 8:49 PM
Vincent Guerard
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Very good example, easy to understand for anybody, thank you Eric.
Mar 13, 2017 10:12 AM
Replying to Vincent Guerard
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So I gather You never face that question.
My assumption is you are talking about project risk management (not organizational risk management). If I am right then it is hard to me to imagine that somebody can ask this quesion. In fact, the only thing that is natural to all project stakeholders is to talk about risk and issues. And each activity inside a project has cost (any type of cost) associated.
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1 reply by Vincent Guerard
Mar 14, 2017 8:47 PM
Vincent Guerard
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Yes, project risk.
I have got some funny one, like "they hired me, there no more risk!". That is more a question of education on what risk management is all about.
I've been told that risk management adds both cost and time, but not as an argument to not follow risk management practices.

As has been stated in other answers, risk management does add cost, because your time has value, but if all it does is add cost then someone is doing something wrong.

Not only should risk management help you prevent unplanned cost, it can also help you identify opportunities (positive risk) to reduce cost.
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2 replies by John Tieso and Vincent Guerard
Mar 14, 2017 8:53 PM
Vincent Guerard
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Yes Aaron, risk should at the minimum cover the increase in the budget. By both identifying opportunity and letting you take decision when choices are many and cost low.
Jul 17, 2017 5:34 PM
John Tieso
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Aaron, you make a great point here. There is a cost to risk assessment and alleviation (If that course is possible), There is also a cost to risk avoidance, but I would argue that risk costs can be offset by cost avoidance as well.

One of the reasons we used Functional Economic Analysis as a tool in the Defense Department was its ability to separate out costs, cost avoidance, and cost savings by applying reasonable alternatives in project decision-making. That gave us a more balanced approach to understanding true costs over the live of a project. Doing the cost analysis up front (adjusted over the life of the project) shows the expected saving occasioned by appropriate risk analysis in reduced future costs.
Mar 13, 2017 11:02 AM
Replying to Henry Hattenrath
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Like any other value added service, such as project management, construction management and independent engineering consultants, it can increase soft cost on a project. But these services have a proven net benefit to controlling hard cost and schedule commitments on a project. Risk management is a service with the distinct process objectives for avoiding unplanned costs and schedule impacts by mitigating threats from project events and for implementing reductions to planned costs and schedule durations by undertaking opportunities for improving project execution. Only the most unusual of clients would ever ignore these value added services and risk a loss in funding or a project project failure.
It is in my line of thinking, risk management don't really add cost, because it avoid unplanned one!
Mar 13, 2017 2:15 PM
Replying to Sergio Luis Conte
...
My assumption is you are talking about project risk management (not organizational risk management). If I am right then it is hard to me to imagine that somebody can ask this quesion. In fact, the only thing that is natural to all project stakeholders is to talk about risk and issues. And each activity inside a project has cost (any type of cost) associated.
Yes, project risk.
I have got some funny one, like "they hired me, there no more risk!". That is more a question of education on what risk management is all about.
Mar 13, 2017 12:00 PM
Replying to Eric Simms
...
I’ve demonstrated the value of risk management by showing people concrete examples they understand. Here’s an example for the IT field:

Task: Purchase 50 HP 800078-S01 PROLIANT DL380 G9 servers (total cost = $400,000 USD)
Risk: The servers might not meet the needs of all internal customers in our specialized environment, and customers will not be able to perform their critical tasks.
Risk Mitigation Strategy: Purchase 2 servers, add them to our environment, and let customers perform intensive tests on them for two weeks. If customers verify the servers will meet their needs, purchase the remaining 48 servers.
Risk Cost: $16,000 USD, and the creation of a new ‘Server Testing’ task with a 2 week duration.
Possible Cost Without Risk Management: $400,0000 USD wasted on servers that don’t meet customers’ needs, widespread delays across the organization as a result of customers not being able to perform their work (resulting in millions of dollars in lost labor and opportunities), an estimated 6 additional weeks needed to find servers that will meet customers’ needs, a 25% surcharge added to cost of new servers to cover expedited processing and shipping, very irate customers.

I then ask risk management opponents if, should they choose not to implement risk management, they are willing to assume personal responsibility for the possible costs should the risk occur. No one has ever said 'Yes'.
Very good example, easy to understand for anybody, thank you Eric.
Mar 13, 2017 5:37 PM
Replying to Aaron Porter
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I've been told that risk management adds both cost and time, but not as an argument to not follow risk management practices.

As has been stated in other answers, risk management does add cost, because your time has value, but if all it does is add cost then someone is doing something wrong.

Not only should risk management help you prevent unplanned cost, it can also help you identify opportunities (positive risk) to reduce cost.
Yes Aaron, risk should at the minimum cover the increase in the budget. By both identifying opportunity and letting you take decision when choices are many and cost low.
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