Risky (Project Management) Business
Jason Dunn
Project Capabilities Office
Freddie Mac
September 26, 2014
1
Introduction to the Data and I
•
Me (Jason Dunn)
– Working on projects or with project teams/systems for over 25 years
– Most clients were Fortune 200 companies
> Freddie Mac is the smallest company that I have worked with
> Assessed performance and risk of hundreds of projects and the
performance of PMOs and their associated processes for over 60
companies
– Currently responsible for project processes and PM maturity at Freddie
•
The Data
– Nearly 600 projects
> 8 different industry sectors
> Range in size from $150k to $1B
> Represents nearly all continents
> 2000+ pieces of data per project
> All independently collected and verified
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Some Fun with Numbers
Value
A Short Quiz…Guess the Percentage*…
0%
 Had a Risk Log
81%
35%
 Kept the Risk Log continuously updated
40%
0%
 Distinguished between Risks and Issues
52%
5%
 Had actions that addressed the risks
36%
25%
 Executed the actions that addressed the risk
24%
35%
 Assigned an Owner to risk actions
17%
*Source: Effectiveness of Project Risk Analysis and Mitigation, IPA, Inc., 2007
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Successful Projects Incorporate Both
Risk-Related Activities
Risk Taking
Actions that take
advantage of a
potential
improvement in
project outcomes
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Risk Management
Actions that
address a
potentially
negative situation
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What Makes a Project Risky?
Challenging
Objectives
Management
Challenges
• Aggressive cycle times
• Tight budgets
• Difficult customer requirements
• Stakeholder mis-alignment
• Sponsor inattentiveness
• Difficult interdependencies
Technical
Challenges
• New technology
• Complex integrations
• Data changes
Resource
Challenges
• Timely availability
• Appropriate skills
• Untimely turnover
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Most Project Teams Felt
Their Projects Were Risky
Mean
1,000
Project Size
(in millions)
500
250
100
50
10
1
0.1
No
Risk
Low Risk
Moderate Risk
High Risk
Extreme
Risk
Project Risk Index
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Well-Managed, Risky Projects Do Not
Compromise Schedule Performance
Risky Project
Profiles*
- Std. Dev.
+ Std. Dev.
Well-Managed
Risk Approach
Industry Average
Poorly-Managed
Risk Approach
0.40
*Projects that scored High on
risk profile questionnaire
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0.60
0.80
1.00
1.20
1.40
1.60
Definition and Execution
Schedule Competitiveness
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Relatively Risky Projects Can Deliver
Good Customer Satisfaction
Risky Project
Profiles*
+ Std. Dev.
- Std. Dev.
Well-Managed
Risk Approach
Industry Average
Poorly-Managed
Risk Approach
Far
5Exceeds
*Projects that scored High on
risk profile questionnaire
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Exceeds
4
Meets
3
Partially
2 Meets
Does Not
Meet 1
Customer Satisfaction Index
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The Best PMs Have More Than Just
Process Knowledge and Skills
Entrepreneurial PMs
have eight key
attributes, two of
which are:
1) Judgment – the
ability to balance
risk taking with risk
mitigation
2) Risk
Management –
Ability to identify
and anticipate risks
while taking
advantages of
opportunities
*Source: Accelerating Project Manager Effectiveness, PMO Executive Council, Corporate Executive Board, 2011
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Objectives of the Session
• Discuss why risks need to be taken
• Discuss what risks are worth taking and ones
that you should not take
• Provide some suggestions on how to identify
those risks
• Provide some suggestions on how to manage
those risks
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Why take risks?
Aren’t we supposed to avoid them?
• In general, Yes, avoid most risks. However…
– Taking risks often helps projects offset inherent risks
• For example:
– Spending additional time to conduct Joint-Application
Development sessions
> Risk: prolongs requirements gathering phase; puts schedule
objectives at risk
– Using Agile methods for the first time in order to develop new
customer-facing application
> Risk: lack of understanding of the process creates learning
curve delays; inability to properly control the project’s scope
– Conducting Work Process Redesign prior to kicking off the
project
> Risk: extends overall cycle time; may significant change the
solution approach
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Here is an example…
Risk-weighted Return on Investment
No Risk
• 100% chance to make $1000
• $500 investment
Some Risk
• 75% chance to make $10,000
• $2000 investment
Significant
Risk
• 33% chance to make $1MM
• $10,000 investment
Taking a risk depends on other factors…
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Here is the Key Message
What if I walked on
a tight rope?
Lesson: Take Risk
Purposefully
Be Prepared
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Rule #1: Don’t Take Stupid Risks
• Don’t execute projects without a schedule or timebox
• Don’t do integrated testing before you do unit testing
• Don’t assume you know what the customer wants
• Don’t base your estimate’s contingency on a fixed
percentage
• Don’t drive cost predictability if you have an
inconsistent estimating process
• Don’t ask if you don’t want to know
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Rule #2: The Risk from Taking a Risk
Must Be Manageable
What is manageable?
It has a
reasonably
predictable
outcome
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It will not
The risk can cause me to
be addressed comprise the
(at least in
most
part)
important
drivers
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What does Risk Predictability mean?
Awareness
• Can you see it coming?
Quantifiable
NonDependent
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• Do you know how it will
impact the project?
• If it occurs, does it prevent or
escalate other risks?
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Addressing the Risk Must Be Possible
What is manageable?
It has a
reasonably
predictable
outcome
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It will not
The risk can cause me to
be addressed comprise the
(at least in
most
part)
important
drivers
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How do we determine if a risk is
“addressable”?
High/Low
Assessment
Determine the
best and worst
outcomes
Larger ranges
are harder to
manage
Span of
Control
Do I have the
resources to
address potential
side-effects?
If No, then
determine who
does and if they
will help
Identify
Linkages
Are there
compounding
effects of taking
this risk?
Be sure to
include the cost
of these risks in
your cost/benefit
assessment
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Strategies for dealing with Positive Risks
•
Acceptance: Taking advantage of the opportunity if it arises, but
not actively pursuing it
•
Enhancement: Actively working to increase the likelihood or
positive impact of the opportunity.
– E.g., Canceling a project that I am working on, in order to deliver
another, more important project quicker
•
Exploiting: Eliminating the uncertainty around realization of the
opportunity.
– E.g., Assigning subject matter experts to directly work on the
project to complete the project faster and with higher quality
•
Sharing: Involving a third party to enhance the chances of
realizing the opportunity.
– E.g., Creating an incentive-based contractual arrangement to
increase focus on key project drivers
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Major Trade-Offs Are Not Required
What is manageable?
It has a
reasonably
predictable
outcome
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It will not
The risk can cause me to
be addressed comprise the
(at least in
most
part)
important
drivers
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Intelligent Risk Taking Generally
Improves the Likelihood of Success
Costs
Sweet
Spot
Benefits
• Significant potential to compromise
key project objective(s)
• Significant potential to deliver on key
project objective(s)
• Will significantly distract my team or
myself from getting work done
• Can be translated into an
organizational benefit
• Does not have sponsor or
management enthusiastic support
• Increase team morale, excitement,
and commitment
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So, how do I determine which “risks”
that I should take?
Assess Project
• What are the greatest risk to project
success or a critical enabler?
Challenges
• Can I successfully address these
issues/opportunities by “acceptance”??
Assess the Risks
• What are my best options to address the
risk or take advantage of an
opportunity?
of Actions
Determine
Likelihood of
Success
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• Are the actions “Manageable”?
• What is the cost/benefit for this
opportunity?
• Are there indirect benefits or costs that
might result from my actions?
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Common Risks and Strategies
for Taking Them Head On
Aggressive
Schedule
New
Technology
Organizational
Change
Work hard to
clarify
objectives
Do proof of
concept
Identify change
agents and
embed in
project
Use Agile
methods
Prioritize
requirements
Add time to
testing
Do trial runs
using
prototypes
Use Joint
Application
Development
Use Agile
methods
Add time to
warranty
period
Spend lots of
time
communicating
Increase User
Involvement
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Uncertain
Requirements
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Ask Yourself These “Stretch” Questions
• What if I could bring this project in earlier than
expected?
• What if I could improve the quality of the product?
• What if I could implement a system that addresses the
resource constraints that I have?
• What if I could implement something that I used at
another company?
• What if I could implement something that I learned at
a conference?
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Keys to Taking Risks
Communicate
• Ensure that decision makers
understand the reasons for the risks
you are undertaking
• Enlist team, sponsors and
stakeholders to share ownership
Plan
• Ensure that risks are
manageable
• Thoroughly plan and resource
any required mitigation
activities
• Implement risk-based activities
Execute
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• Actively monitor progress and look
for changes in risk profile
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And I Leave You With This Thought…
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Thanks to Today’s Attendees
Enjoy the Rest of the Conference
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