Monday, April 1, 2013

Project Risks -- What is the biggest?

Projects are full of risks. These risks usually have an enormous impact for usually a long time on the profitability of an organisation

For as long as project management exists there is talk about risks. An huge amount of knowledge and experience has been developed. Still, I think that one factor is missed. Not that this factor suddenly removes all the other risks. It is a factor that acts like a 'multiplier'.

There are many sorts of risks. All of which can be grouped in different ways. To let the 'multiplier' emerge, I will start with dividing the risks into risks for the organization and risks for the project.

Risks for the organization
Put very simply, a project is an investment. Investments are all about Return-On-Investment (ROI). The 'return' doesn't need to be money. The 'return' doesn't even have to be tangible. Although this makes it difficult to establish the ROI, it is how it is.

For organizations risks means the probability for:
  • Too little 'Return', resulting in:
    • insufficient means to do other important projects in the future, or even to sustain the continuity of the organization
    • too little believe of the stakeholders, intern and extern, in the future
  • Too much "Investment', resulting in
    • insufficient capability to do other important projects timely
    • huge risk in to keep investing in a money pit because the 'depreciation' became too big
We all know that regardless what, some projects will not go well or will fail. Unfortunately we don't know which ones. As long the portfolio of project will average out in a good way, then all is fine. Avering out only works if the organization does many projects. Since each organization has limited resources and people, there is only one way to do many projects.

The further is looked into the future, the more assumptions are needed and the more wrong each of these assumptions can turn out. Sometimes it is okay. Usually not. There is but one way to increase the certainty.

The larger a project, the more dependencies, the more stakeholders, the more complex. The more complex, the more risks, the more uncertainties, and the more overhead. The more overhead, the higher the investments. The higher the investments, the more control is needed, etc.

The larger a project, the more of the desired or rquired deliverables are interdependend. If one thing can have dramatic consequences, is the cascading effect of created dependencies.

An organization is exposed to many different risks related to projects. However, there seems to be a  'multiplier' causing to blow up things significantly. Harming both the 'Return' as the 'Investment'.

Risks for projects
Below you'll find a list on project risks, many more exist on the internet:
  • unclear / moving / jumping goals / objectives
  • scope creep
  • unknown / unspecified work
  • lack of a project plan (who needs to do what and needs what input from whom)
  • changes in the environment (from changes in the market to legal and political shifts)
  • (external) stakeholders with other interests
  • access to "promised"  resources
  • ill fitted project management methodology / approach
Some of those risks are generic. Some risks are way different very specific to the situation like ambiguity in the upcoming change in the law.

But looking at that list of risks, it seems to me that the 'multiplier' also is of significe on each of those risks.

Size does matter
Of course there are many advantages of a project being large. A large project is less likely to be stopped halfway. Which is kind of nice if you're externally involved. Also a large project gets the necessary attention of both internal as external stakeholder. Which is nice. Better than nice, if you look at the list, it actually increases changes on success.

But does this outweigh all the disadvantages? And, is it feasible to make projects smaller?

Can you imagine the building of a skyscraper broken down into smaller projects? Or a large organizational change? Or the building and implementing of a large piece of software? Or, look closer to home. Look at all those projects that take more than 6 months ...can they be made smaller? 

Always is too big a word. But I am convinced that more often than not projects can be made smaller. The more because it is based on the expierence where projects were drastically reduced in scope and the to  be achieved objectives were organized smartly.

Independent of it is possible. It must be done. Projects must become smaller. Size is too much of a multiplier for risks. Especially when it is all about: organizational flexibility, risk reduction, complexity reduction, striking power ... a healthy ROI.

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