Home Phone

Project Risks – the role of the expert, the naïve challenger and Bernoulli a Dutch mathematician.

A risk can be defined as an event that could happen that will prevent your project delivering all intended benefits on time in full. An issue is very different, it is something that has happened that threatens your project delivering all intended Issuebenefits on time in full. Swimming in shark infested waters is risky, removing a plane from a tow truck is an issue that has to be dealt with.

I contend that one of the key measures of success for any project is the length of the issues log. The shorter the list, the better the risk planning. However, risk planning is challenging to do well. It is partly a timing challenge but mostly it’s a thinking challenge. Let’s look at timing first.

If you think of your project as a journey, you cannot do risk planning well until you are clear about what success looks like for your project and you have had the chance to build a granular picture of a destination worth heading towards and have had this verified with all key stakeholders. Depending on how many and how diversified your key stakeholders are, this can be a challenging step in itself. Once this is agreed you and your project team then need to understand how you are going to reach this destination. What are the key milestones that you need to achieve along the way to this destination and once these are known and agreed then, and only then, can you consider what may stop you succeeding along the way.

Prediction quoteAll of this thinking requires you and your team to enter into the tricky business of prediction, and to quote Niels Bohr the Danish physicist, “prediction is very difficult, particularly if it is about the future.” To give you the best chance of success you need at least two different characters in the room when you are doing the risk planning step.

The first is the ‘expert’. The ‘expert’ has invaluable knowledge that enables them to judge risk based on their experience gained mostly from getting it wrong in the past! The more ‘experts’ you have to ask the more likely you are to develop a quality risk plan. The second is the naïve questioner. They have an important role to play as they have little or no previous knowledge so are not trapped by the prevailing ‘expert’ mindset. As such they are more likely to challenge assumptions and identify risks that are invisible to the ‘experts’. The more naïve challengers you have the more likely you are to identify new or emerging risks. To do a professional job you need both in the room and time to explain the journey you are about to take with the project and the destination you are heading for. They also need time to think and then a process that enables them to share their views.

Another factor to consider is the level in the hierarchy your team is drawn from. This is where the Dutch mathematician Bernoulli enters the thinking process. He developed a thesis that states “the utility resulting from any small increase in wealth will be inversely proportionate to the quantity of goods previously possessed.” Put simply the value of a £1 to us varies depending on how much money we already have and how wealthy we feel at any point in time. To understand this thesis, consider this question.

You have a choice between a gift of £20 for certain or to play a game in which you stand a 50% chance of winning £50 and a 50% chance of winning nothing. Would you play?

When I ask teams to think about this I find some team members would play, others would not despite the reality that the probability and reward is clear for all to see. The point is they each apply their own criteria to this probability and reward so the outcome is not certain. I then go on and say, for those that did not want to play:

If the gift remained the same how much would the prize have to rise to tempt you to play? 50% of £55; 50% of £60; 50% 0f £70; 50% of £100 etc.

There comes a point at which the reward is so great compared to the risk everyone will play. This is the concept of ‘utility’. Translating this into your project means that you need people in the room at different levels in the hierarchy if you are to do risk planning well. The risks perceived by the functional expert, who is in the team as they are responsible for their tasks in the project, are viewed very differently than the risks perceived by the project leader, the functional director and the CEO. Whilst it is unrealistic to expect everyone to be in the room when you are risk planning you can at least try and see the project through their eyes by engaging in a process of ‘imagineering’.  Ask the question for example; ‘how would the Operations Director, the CEO and the Health and Safety Manager etc. view the risks in this project?

In summary, to do risk planning well requires it to be done at the right time in the process and the applied intelligence and active involvement of several different people. The reason it is not done well is often cited as lack of time. The alternative of course is to get into effective issues management and guess what? This takes a lot longer to do and is far more expensive, yet somehow it appears to be the choice many projects take?

If you would like to find out more about how we can help you with your project management challenges then please click here and take a look at our new Delta Team Based Project Management approach.