September 25, 2018

The Risk of Managing Risks

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Does undertaking efforts to manage risk really make a difference? At times, I wonder. I recently conducted a review for a construction project that was stalled due to the collapse of a portion of the roof structure. I asked to see the risk register and was provided with a very comprehensive document – yet the risk of the roof collapsing was not included.

After making a number of enquiries, I realized that the project team that developed the risk register did so based on their perspectives of the project and on assumptions they made. They assumed that the roof structure would hold as it passed all structural tests but did not realize that the design of the roof’s structural elements could lead to sudden collapse under certain weather conditions. This was something the roof design team was aware of, but they were not consulted when the risk register was drawn up.

I realised that this was the problem. Their visibility of the project was bounded within the confines of their combined experience and assumptions. They didn’t reach out to the roof design team, who were stakeholders in this project, who could have pointed them in the right direction. This was where their risk management efforts failed.

The more I thought about how they could have been better positioned to identify this risk, the more I realised that by incorporating the views of relevant stakeholders, the project team would have been able to acquire a multidimensional perspective of the risks that surround a project. This would have enabled them to identify all risks.

By engaging with key stakeholders, such as the roof design team, assumptions made by the project team may be validated. This will prevent the possibility of relying on assumptions that don’t hold when the project takes off. By incorporating the perspectives of relevant stakeholders on risks faced by a project when developing a risk response strategy, a deeper understanding of the risks involved and a better formulated risk response strategy emerges.

A practical starting point would be to ask the following questions that relate to any new project:

  • What is that we don’t know?
  • Who are the stakeholders that really matter?
  • What risks do they see from their standpoint?
  • How can we incorporate these risks into our risk response strategy?

The learning point that emerged from this situation is that it’s important when undertaking projects to engage with key stakeholders to establish different risk scenarios from the perspective of all relevant stakeholders. The level of engagement can vary from collecting information from stakeholders, informing stakeholders of the risks, involving them in developing risk profiles, to even consulting with them on how to deal with the risks identified. The decision on the extent of engagement will depend on the extent to which the stakeholders have involvement, interest as well as influence on the project.

Interactive discussions with key stakeholders curtail the possibility that the outcome of these strategies could affect them negatively in the long run. Jointly agreeing on risk response strategies brings about better ownership of the outcomes by both the project team and the key stakeholders.

Engaging stakeholders also helps in determining the severity of risks, the likelihood of these risks, and their impact level. This in turn will enable a more accurate assessment of the risk to emerge than would be possible when this work is done purely by the project team.

Often, project teams develop risk response strategies on their own. This itself is a risky thing to do. To document risks purely from one point of view poses a risk – the risk of managing risk. By doing so, one overlooks key aspects that undermine project success. I would be wary of establishing project risks based solely on my perspective. Would you ?

The author of this article is Asst. Prof Dr Rumesh Kumar, who is the Managing Director of Sharma Management International and a course tutor for Project Management and Strategic Risk Management for Edinburgh Business School. He may be contacted at rumesh@sharma.com.my

 

EBS will run four day intensive seminars in Strategic Risk Management at the Edinburgh and Malaysia campuses during July 2016.  Should you require further information relating to the On Campus Seminars, please contact the On Campus Courses Department at oncampusmba@ebs.hw.ac.uk .