Identifying and Managing Project Risk | Tom Kendrick PMP

Summary of: Identifying and Managing Project Risk: Essential Tools for Failure-Proofing Your Project
By: Tom Kendrick PMP

Introduction

Embark on a journey to discover the essentials of risk management through the lens of the book ‘Identifying and Managing Project Risk: Essential Tools for Failure-Proofing Your Project’ by Tom Kendrick PMP. Explore the significance of planning, the impact of external factors, and the role of historical data in managing risks. Delve into real-life examples, such as the construction of the Panama Canal, to learn how vital it is to anticipate and acknowledge risks in projects. This comprehensive summary offers valuable insights on managing resources, embracing opportunities, and adopting innovative techniques in risk assessment.

Managing Project Risks

Every project comes with risks, but effective management practices can be developed through studying completed projects. Risk is a product of the magnitude of loss and probability of loss occurrence. Project managers need to pay attention to both statistical metrics and risk data to justify and control costs, manage a project portfolio, test project plans, set up a management buffer, facilitate communication, and increase control. Root causes of risk vary depending on risk descriptions.

Projects can be risky, and every project has varying degrees of risk. Project managers need to understand these risks to manage them effectively. The best way to understand project risks is to examine completed projects. Project risk is the product of the magnitude of loss and probability of loss occurrence. Institutions manage macro risks by collecting and analyzing large amounts of data, but project managers primarily manage project risks based on the current project under management. Effective risk management involves paying attention to statistical metrics and risk data to justify and control costs, manage a project portfolio, test project plans, set up a management buffer, facilitate communication, and increase control. Root causes of project risk vary depending on risk descriptions. By understanding risk management, project managers can minimize chaos and control costs.

The Rise and Fall of the Panama Canal Project

The Panama Canal project was an ambitious idea to connect the Atlantic and Pacific Oceans. What started as a promising endeavor backed by investors, quickly turned into a financial nightmare led by Ferdinand de Lesseps, “The Great Engineer.” De Lesseps ignored technical advice, underestimated costs, and failed to plan for potential obstacles like yellow fever outbreaks and digging a 130-meter deep ditch. Eventually, his company went bankrupt in 1899, leaving the project only 15% complete. Later, the U.S. government took over the project and brought in John Stevens, who demanded meticulous planning and eradication of yellow fever. Stevens’ approach worked, and the path forward became clear. The completed Panama Canal stands as an impressive engineering feat, but it also serves as a cautionary tale of the consequences of ignoring expert advice and disregarding planning and risk management techniques in complex projects.

Managing Project Schedule Risks

Effective project management requires managing risks associated with delays, dependencies, and estimations. This summary outlines three significant risks that create schedule risk, such as material delivery and availability issues, dependency on other projects or systems, and poor estimation procedures. As the author notes, minimizing estimation risk can be achieved through various techniques, including using historical information, consulting experts, and relying on Delphi group estimates. Ultimately, managers with good project discipline can manage these risks to avoid delays and ensure project success.

The Three Types of Resource Risk

Resource risk encompasses people, outsourcing, and monetary risks that impede project progress. Resource planning and computer analysis can help project managers alleviate monetary risks while people risks require more subjective approaches such as dedicating less than 70% of an individual’s time to project work or assigning two projects instead of one. However, when individuals are assigned to three or more projects, the time spent on project work drops significantly. Careful planning is the only way to tackle all forms of resource risk.

Early Analysis for Project Success

A key aspect of project management is early analysis of project constraints. Certain projects may simply not be feasible, and it is important to recognize this early on. Addressing resource shortages or overly-ambitious timelines can prevent future problems. Determining priorities involves trade-offs and requires considering the options of “good, fast, or cheap,” picking two.

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