The identification of risks is very important. Each must be described in detail so that it will not be confused with any other risk or project task that must be done. Each risk should be given an identification number. During the course of the project, as more information is gathered about the risk, all of this information can be consolidated about the particular risk.
The first component we need to discuss is the identification of the risk event. In the course of identifying risk events we will call upon the project team, subject matter experts, the stakeholders, and other project managers. Much of the work already done in the project will be utilized in the risk management process. Among these items that will be used are the project charter, the work breakdown structure, project description, project schedule, cost estimates, budgets, resource availability, resource schedules, procurement information, and assumptions that have been made and recorded.
There are many ways to discover and identify risks. I will discuss several of them here:
• Documentation reviews
• Delphi technique
• Nominal group technique
• Crawford slip
• Expert interviews
• Root cause identification
• Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis
Documentation reviews comprise reviewing all of the project materials that have been generated up to the date of this risk review. This includes reviewing lessons learned and risk management plans from previous projects; contract obligations; project baselines for scope, schedule, and budget; resource availabilities; staffing plans; suppliers; and assumptions lists.
Brainstorming is probably the most popular technique for identifying risks. It is useful in generating any kind of list by mining the ideas of the participants. To use the technique, a meeting is called to make a comprehensive list of risks. It is important that the purpose of the meeting be explained clearly to the participants, and it is helpful if they are pre pared when they arrive at the meeting. The meeting should have between ten and fifteen participants. If there are fewer than ten, there is not enough interaction among the participants. If there are more than fifteen people, the meeting tends to be difficult to control and keep focused. The meeting should take less than two hours.
For larger projects it may be necessary to hold several meetings. Each meeting should deal with a separate part of the project and with the risks associated with that project part. This will keep the number of persons involved to a reasonable size, and the meetings will be much more productive.
When the meeting begins, the participants can name risks that they think are important for consideration in the project. No discussion of the items listed is allowed at this time. As participants see ideas listed, they will think of additional ideas. Each new idea will elicit another idea from someone, and many ideas for possible risks will be listed.
The Delphi technique is similar to brainstorming, but the participants do not know one another. This technique is useful when the participants are some distance away. The Delphi technique is much more efficient and useful today than it has been in the past because of the use of e-mail as a medium for conducting the exercise. Because the participants in this technique are anonymous, there is little to inhibit the flow of ideas. Where the participants are not anonymous, there is a tendency for one or more persons to dominate the meeting. If one of the participants is a higher-level manager than the others in the meeting, many of the meeting participants will be inhibited or try to show off in front of the upper-level manager. All of this is avoided in the Delphi technique.
The process begins with the facilitator using a questionnaire to solicit risk ideas about the project. The responses by the participants are then categorized and clarified by the facilitator. The categorized, clarified list is then circulated to the participants for comments or additions. The members of the group may modify their position, but they must give reasons for doing so. Consensus and a detailed list of the project risks can be obtained in a few rounds.
The Delphi technique avoids one of the major drawbacks to brainstorming. Because the participants are not known to one another, it avoids peer pressure and the risk of embarrassment from putting forth a silly idea or one that could be ridiculed by others. This does not come without cost. The facilitator must do much more work for the Delphi technique than the facilitator in a brainstorming session. For example, the facilitator frequently has to nag the participants, who may procrastinate in returning their responses.
There is also some risk involved in using this technique. The facilitator is required to analyze and categorize the inputs from the participants, which means that he impresses much of his opinion on the group.
In the nominal group technique, the idea is to eliminate some of the problems with other techniques, particularly the problems associated with persons' inhibitions and reluctance to participate. In this technique a group size of seven to ten persons is used. The facilitator instructs the participants to privately and silently each list their ideas on a piece of paper. When this is completed, the facilitator takes each piece of paper and lists the ideas on a flip chart or blackboard. At this time no discussion takes place.
Once all of the ideas are listed on the flip chart, the group discusses each idea. During the discussion, clarifications or explanations are made. Each member of the group now ranks the ideas in order of importance, again in secret. The result is an ordered list of the risks in order of their importance. This process not only identifies risks but also does a preliminary evaluation of them.
This process reduces the effect of a high-ranking person in the group but does not eliminate it, like the Delphi technique. The nominal group technique is faster and requires less effort on the part of the facilitator than the Delphi technique.
The Crawford slip process has become popular recently. The Crawford slip process does not require as strong a facilitator as the other techniques, and it produces a lot of ideas very quickly. A Crawford slip meeting can take place in less than half an hour.
The usual number of seven to ten participants is used, but larger groups can be accommodated, since there is a fairly small amount of interaction among the persons in the group. The facilitator begins by instructing the group that she will ask ten questions, one at a time. Each participant must answer each question with a different answer. The same answer cannot be used for more than one question. The participants are to write their answer to each question on a separate piece of paper. (Post-it Notes are good for this purpose.) The facilitator tells the participants that they will have one minute to answer each question.
When all the participants are ready, the facilitator begins by asking a question such as, ''What is the most important risk to this project?'' The participants write down their answers. After one minute, the facilitator repeats the question. This is repeated ten times. The effect is that the participants are forced to think of ten separate risks in the project. Even with duplicates among the members, the number of risks identified is formidable.
Experts or people with experience in this type of project or problem can be of great help in avoiding solving the same problems over and over again. Caution must be exercised whenever using expert opinions. If an expert is trusted implicitly and his or her advice is taken without question, the project can head off in the wrong direction under the influence of one so-called expert.
The use of experts, particularly those hired from outside the project organization, can be costly. Care must be taken to ensure that experts are used efficiently and effectively. Before the expert interview is conducted, the input information must be given to the expert and the goals of the interview must be clearly understood. During the interview, the information from the expert must be recorded. If more than one expert is used, the output information from the interviews should be consolidated and circulated to the other experts.
Root cause identification is a process developed by RCA. It helps to identify the what, how, and particularly the why of something going wrong. It seeks to find the underlying causes that can be identified and controlled. The RCA process is aimed at identifying the underlying cause for a problem. Frequently people tend to fix the symptoms of a problem because they are more apparent. By fixing the root cause of a problem we can avoid the same problem in the future.
These root causes are something we can do something about. For example, assume that a risk that parts will be delivered late becomes a risk event that actually happens. As we investigate why this happened we find that there was a severe snowstorm at the vendor's location and that trucks could not move for three days. The root cause of the problem is not the severe weather. It is not ordering the parts early enough to allow for severe weather delays.
Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis
SWOT analysis takes into consideration the external and internal environment of an organization. Strengths and weaknesses are usually considered internal environmental factors while opportunities and threats are usually considered external.
As can be seen in Figure 7-1, a matrix can be made showing the possible combinations of the internal and external factors. The S-O strategies are the ones that should be pursued because there is a good fit between the external opportunities and the internal strengths of the company. With W-O strategies, we must overcome our internal weaknesses before we can pursue the opportunity. S-T strategies are strategies where we must use our strengths to overcome the threats to us. W-T strategies are strategies where we must find a defensive position to prevent the threats from taking advantage of our weaknesses.
Checklists have gained in popularity in recent years because of the ease of communicating through computers and the ease of sharing information through databases. There are many commercially available databases, and there are many checklists that are generated locally for specific companies and applications.
Figure 7-1. SWOT analysis matrix.
In their basic form, these checklists are simply predetermined lists of risks that are possible for given projects. In their specific form, they are risks that have occurred in the particular types of projects that a company has worked on in the past. Frequently, certain customers and stakeholders have particular risks associated with them that can forewarn the manager of the new project.
The analogous method of identifying risks is quite simple. From the lessons learned and the risk management plan of other projects that were similar, an analogy can be formed. By comparing two or more projects, characteristics that are similar for each project can be seen that will give insight into the risks of the new project.
Various types of diagramming techniques have been developed that will help in the identification of risks. Cause-and-effect diagrams are used to organize information and show how various items relate to one another. There are several possible risks that contribute to the main risk in question. Each of the contributing risks can be further diagrammed until there is a complete hierarchy of risks. Once diagrammed, the relationships between the risks can easily be seen.
Flowcharts are diagrams that show the sequence of events that take place in a given process. They also show conditional branching. Each point on the flow diagram can be used as a possible point for identifying risks. A comparison of risk identification techniques is shown in Table 7-1.
For other diagramming techniques, see Chapter 4, Quality Management.
Table 7-1. Comparison of risk identification techniques. Identification
Technique Advantages Disadvantages
Nominal Group Technique
Encourages interaction in the group
Cannot be dominated by an individual
Can be done remotely by e-mail
Avoids problem of early evaluation
Every person must participate
Reduces the effect of a dominant individual Allows for interaction of participants
Results in a ranked list of risk ideas
Easy to implement Every person must participate
Large number of ideas generated
Able to do with larger than normal group Reduces the effect of a dominant individual
Take advantage of past experience
Focused and organized Easy to use
Can be dominated by an individual
Can focus on specific areas only
Requires a strong facilitator Must control tendency of the group to evaluate
Time consuming Labor intensive for facilitator
Time consuming Labor intensive for facilitator
Less interaction between participants
Expert may be biased Time intensive
May not include specific items for this project
Use past experience to avoid future experiences Similar projects have many similarities
Clear representation of the process involved Easy to generate Many computer tools available for them
Easy to obtain data that is not relevant
Analogy may be incorrect
Sometimes misleading Can be time consuming
Once the risks have been identified, they must be recorded. There is nothing worse than identifying a risk and then not thinking about it again until it happens. Since risk management must take place many times during the course of the project, there needs to be a way of organizing and documenting the risks. In the beginning of the project the risks may only be identified. Later in the project, additional information will be continuously added to the risk events that were identified.
This does not need to be a complicated documentation method, but there are certain pieces of information that must be recorded:
1. Name of the risk
2. Description of the risk
3. Date the risk was entered
4. Person responsible for managing the risk
5. Reference to the work breakdown structure
6. Probability that the risk will occur
7. Impact of the risk if it occurs
8. Severity of the risk
9. Mitigation strategies
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