One of the best memes I have seen that illustrates the importance of risk management is the image below.
As the graphic points out, a little bit of planning upfront can save a project money and time in the long run. Condoms is a cheap way to prevent pregnancy, much cheaper than diapers, which are just one small expense among many when it comes to raising a child. I read an article in USA Today a few years that calculated the cost to raise a child is more than $200,000, and that does not take post-secondary education into account. Studies have also shown that people who wait to have children until they complete a bachelors degree also make more money over their careers and have lower unemployment.
All this takes some upfront planning, but a little planning early in the project to analyze and prepare for risks can go a long way to ensuring a project’s success. Unfortunately, the current state of risk management is not good and needs serious improvement. A short list of things projects need to do includes:
- Conducting quantitative risk analysis for cost and schedule
- Conducting portfolio level risk analysis
- Analyzing cost and schedule risk jointly
- Not relying solely on S-curves establishing budgets
- Setting reserves in a careful way to avoid overspending and taking too much time
- Using incentives in contracts to motivate project managers and contractors to stay within budget and finish on time
This list is a partial one. I address all these issues and more in my forthcoming book Solving for Project Risk Management: Understanding the Critical Role of Uncertainty in Project Management, which will be published on November 3rd by McGraw-Hill. That is also the day of the presidential election, so may want to pre-order now from Amazon or Barnes and Noble. You can also read Chapter 1 for free, or watch a 10-minute presentation summary or a 40-minute presentation summary.