by Nigel Holmes

Created on: August 27, 2008

Uncertainty is part of every project. Deliveries might be delayed, bad weather could halt outdoor work, or a key machine might breakdown. A big part of project management is about anticipating and being prepared for such events. How you identify and manage risk depends on the nature of the project and what's important to your customer, but here are some techniques that I have found effective.

Begin by understanding the relative importance of cost, time and performance. During the initial planning phase, determine which of these parameters is fixed, where some slippage might be tolerated, and where something extra would be highly appreciated. For instance, some projects are time-constrained. In such a case it's often permissible to go over budget to hit the deadline. Conversely, a customer might be highly delighted if, for just a little extra money, you can give him a raft of additional functions.

It's prudent to get input from your customer on his relative priorities when the project launches. This provides some direction should problems arise and force you into making difficult decisions. An added benefit from having this discussion up-front is that it will be unemotional: once you hit trouble and nerves are frayed, chances are that it will be difficult to have a cool and rational conversation about the choices that have to be made.

Having established priorities, identify the risks in the project. Start with the Work Breakdown Structure and for each task ask "what if?" On a small project the manager can do this himself, though there are advantages in getting other people involved.

Now, a caution on risk identification: it's not sufficient to list what might go wrong. You must drill down to the specifics of what would cause each risk to occur as this provides the basis for planning avoidance and mitigation actions. The fishbone or "Ishakawa" diagram can be a useful tool for this. So for example, you might have a major "bone" identified as "late delivery of circuit board," (this is your risk item,) but then to that bone you attach all the reasons why the circuit boards could be late. You might see causes such as "delayed at customs" or "prototype fails testing".

During your brainstorming session don't worry about the likelihood of things happening. Even though some may seem improbable, get them all listed. Assign probabilities only after you, or the team, feel everything that could happen has been identified. On a small project it may be sufficient to categorize

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