Hello and welcome back. In my last post, we looked at Cost and Time Management. If you missed it, here is the link.

Summer is finally upon us, sort of. It appears sunny outside as I look out of my window and see the clear blue skies. But earlier in the day, a friend in passing, casually mentioned that it may rain tomorrow. We both made 'blah' faces and went our separate ways.

What does the weather have to do with today's Plog? Well, we're going to be talking about the fifth knowledge management area in the PMBOK, called Risk Management.

Weather and our plans around them, I'm sure many of can relate to. Some of us like to plan several days ahead, looking at the extended forecast. We make adjustments to our plans to accommodate what we expect to happen with a certain degree of certainty. Others like to simply 'wing' it. With a 'what ever happens happens attitude'.

Is there a right way and a wrong way? Likely not. But there are methods that reduces the "risk of exposure", as industry likes to call it. It's about reducing the amount of exposure to risk. Less exposure equals less likelihood of something bad from happening. Before I go any further, I'll point out here that I am by no means a risk management specialist. There are those out there who are and am sure can share great wisdom with us. My objective here is to share some very straight forward concepts and methods in risk management.

Several weeks ago I took my family camping up north. My wife, not being big on camping, always looks for an excuse to not have to go up. It might be the black flies, mosquitos, horse flies, too hot, going to the bathroom, or rain. You get the picture. Well, she looked up the weather forecast and pointed out that she saw a forecast of raining from Monday right through to next Saturday, our last day. So naturally, I too went online and looked up several forecasts. One of which indicated slight chance of rain on Monday and Tuesday, with sunny for the remainder of the week. I thought "hey that's not too bad!". Of course my wife did not think so, but because I planned it five months ago, we packed up and headed up.

Where am I going with this? My camping story may be a good example of what often happens to us in real life business world scenarios. As Project Managers we try to 'forecast' what is up ahead, resourcing needs, supply and demand adjustments or just upcoming employee holidays. 

In the most basic analysis of risk, one sets up a chart with four quadrants. The bottom 'X' axis is 'Likelihood expressed in percentage' and the 'Y' axis is the 'Impact'. Going over your list of known potential risk items, you peg each one onto this matrix. At the end, you review and prioritize starting from those that are in the top right hand corner, the 'High Probability, High Impact' quadrant items. Of course these are the ones that are of most importance to your business.

After this, without going too much into detail due to time constraints, you take your prioritized list and evaluate what specifically are the impacts to the business, and what is the mitigation steps that need to be performed to circumvent this risk or action plan in the event that it occurs.

The last two points are the meat and potatoes from a content and analysis perspective, but what about the 'real world'? After all isn't that what we're all here to discuss and learn about? Because at the end of the day often the best laid plans fall by the way side as the project plan is executed.

So I'll start by first mentioning a small little fact that most fail to recognize. And that is that the actual exercise of performing a risk analysis (hopefully with peers and your boss) is what is immediately beneficial. What do I mean by this? Well, that by actually booking a meeting, putting together an agenda, gathering together, getting into the mind set, talking and taking notes specific to risk management gets your team to start thinking about it. Risk management is only good if the plan is in place BEFORE tragedy strikes.

In my example of my camping trip, another important point is high lighted. Did you catch it? In the gathering of data, we tend to not be as unbiased as we think. In other words, we skew or look for data that supports the end result that we hope to achieve or find beneficial to our personal cause. This is called the 'Error of Inductive Inference' or some call it the 'Tolstoy effect'. My wife, found great data that supported her cause, that of not going camping due to seven days of rain. I on the other hand, found a decent forecast that didn't look as bad, only two days of rain, followed by 5 days of glorious sunshine.

So who's right? Well, of course we all know when it comes to forecasting the weather, it's a lot of science with a good dash of guess work based on current meteorological data preceding your present time and location. So we really don't have a 'right' or 'wrong' answer, only time will tell. What does that mean for the business world? Well, it turns out that oddly enough corporations don't run to different from what I just mentioned above. Often times there is lots of guess work mixed in with historical data and data from outside sources such as consultants. But we have no idea whether one item will come true or not. All we are hoping to do is to initiate discussion, make plans and watch the project for signs of danger. Do we skew our data? We certainly try not to. But that's why we have group consensus, documentation and sign off protocols (some of which I've already touched on and the topic of 'effective meetings' will be covered in a future Plog).

That concludes this Plog installment on the fifth PMBOK knowledge area, risk management. I hope you were able to get something out of it. If nothing else, remember to change to another weather channel if you don't like the results of the first one.

Oh, did we end up going and staying at our camp site? We stayed for two days of which it sprinkled intermittently. The mosquitos were as bad as I had expected. We had comfort stations and the lake was beautiful. Unfortunately we left on wednesday and checked into a five start spa resort. Best laid plans...

Next Plog, I look at communications management, the sixth PMBOK knowledge area. Stay tuned.

Sincerely,

W. Beacon, PMP