In my lectures when it comes to the topic of managing risks, I start with a figure just to illustrate the importance of managing risks. This figure shows that the chances of risks occurring decreases as the project comes to an end, whereas the cost to fix risk events increases within this time period. The uncertainty is generally at the highest level at the start of projects, and it decreases as time passes because more information becomes available throughout the project life cycle. On the other hand, the cost of change increases as the project progresses throughout its life cycle due to the increase in the amount of earned value, which will become useless as a result of any change. Here’s how you can manage uncertainty vs. the cost of change.
Are you good at managing risks in order to be able to prevent the cost of change?
Here are five questions to help you determine if you are good at managing risks:
1. How many hours do you spend identifying risks at the beginning of your project regardless of the size and complexity of it?
a. 2-5 hours
b. 6-15 hours
c. 16-30 hours
d. More than 30 hours
2. Whom should you involve in the identification of risks?
a. All team members
b. All team members and related people in the organization
c. All critical stakeholders including team members
3. How often do you plan meetings to revisit current risks and identify new ones?
a. Once a week
b. Once a month
c. Once a quarter
4. How much money can you use to manage risks?
a. Less than 1% of the total budget
b. Between %1 and %3 of the total budget
c. Between %4 and %6 of the total budget
d. More than %7 of the total budget
5. Do your sponsors or senior executives support your spending decisions to realize risk responses?
a. Always / Very often
Here is some insight into your risk management approach based on your answers:
If you have 1-a; 2-a; 3-c; 4-a; 5-c then you are being managed by the uncertainty. This approach is reactive rather than the proactive. Get ready to face the cost of change.
If you have 1-b or 1-c; 2-b; 3-b; 4-b or 4-c; 5-b then you are aware of the uncertainty and have a proactive mindset.
If you have 1-c or 1-d; 2-c; 3-a; 4-d; 5-a then your project is very resistant to risks and ready for the uncertainty.
If you have some different combinations of the above answers but at least one of the following answers of 1-c;1-d or 2-c or 3-a or 4-c; 4-d or 5-a then you are on the right path, continue on.