Dependencies Between Risks

If project managers had unlimited funding, they could generally identify a multitude of risk events, both significant and insignificant. With a large number of possible risk events, it is impossible to address each and every situation, and thus it may be necessary to prioritize risks.

Assume that the project manager categorizes the risks according to the project's time, cost, and performance constraints as illustrated in Figure 17-13. According to the figure, the project manager should focus his efforts on reducing the schedule-related risks. However, it must be recognized that even if schedule has the highest priority, you may also have to start work on cost and technical performance-related issues at the same time, but the schedule-related issues may have the greatest resources applied.

The prioritization of risks could be established by either the project manager or the project sponsor, or even by the customer. The prioritization of risks can also be industry specific, or even country specific as shown in Figure 17-14. It is highly unlikely that any project management methodology would dictate the prioritization of risks. A well-thought-out risk analysis methodology does dictate, or at least reveal, the priority of risks, but then project management input may change the resulting priority. It is simply impossible to develop standardization in this area such that the application could be uniformly applied to each and every project.

The prioritization of risks for an individual project is a good starting point and could work well if most risks were not interrelated. We know from trade-off analysis that changes to a schedule may induce changes in cost and/or performance. The changes may not occur in both dimensions because this depends on the objective functions and market constraints of the buyer and seller. Therefore, even though schedules have the highest priority in Figure 17-13, risk response to the schedule risk events may cause immediate evaluation of the technical performance risk events. Yes, risks are interrelated.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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