Not all risks can be analyzed from data you can pragmatically collect. Variability of outcomes and ambiguous processes, from external to your business, can have a significant impact on your risk profile. This video defines these risk elements and provides
- Not knowing what you need to know can be stressful. Not even knowing what you don't know can be distressing. Let's look at two categories of project risk that involve things you don't fully know. These risks can create problems if they're not considered. The first is variability risk. This is risk that comes from variables in your environment that always exist, but over which you have no control.
For example, weather can have a significant impact on the schedule of a construction project. While you might target a time of year when the weather's more cooperative, weather will always vary. The second category is ambiguity risk. In contrast with variability risks where you know something will happen but the results will vary, like the weather, ambiguity risks deal with unknown factors about what will happen in the future. Examples of this are legislation that may be signed into law during the course of your project that require changes, new technical inventions that may improve or detract from your project, or a new product that may be introduced by a competitor that exceeds your deliverable's capabilities.
To help you identify these two risk types, I've included a checklist with examples in the exercise file for this course. These two risk types are especially difficult as they have characteristics that are unknown. So how do you deal with them? Let's return to our variability risks. Timeframes or circumstances where the variability is less is the first place to look, so for example scheduling construction during periods when the weather is more favorable would demonstrate this approach.
Here's another approach. If you have access to records from several past projects similar to the project you're running, you can compile a list of schedule possibilities for completing the project based on that history and plan your project around the information you uncover. If that project history is not available or you need more detailed schedule predictions, you can use Monte Carlo analysis. Monte Carlo analysis uses probability spreads compiled from running large numbers of possibilities through a math-based model to determine the range of possibilities for your project schedule.
This can inform you about the chances of your schedule completing in varying amounts of time to help you manage schedule risk. Ambiguity risks are typically addressed by collecting expert opinions. For example, people who are close to the workings of government can help predict where and when laws might change. Industry experts would likely signal an upcoming new development like the moving downloading services that ultimately spelled the end for brick and mortar DVD rental stores.
While you can never know every risk that may surface for your project, having a standard process for considering the possibilities is important so you don't get stung. Spending time looking at the potential impacts of variability and ambiguity risks can save you time, help you be ready for the unexpected, and increase your perception as a project leader.
Note: This course follows the latest guidance from Project Management Institute, Inc., as outlined the PMBOK® 6 Guide.
- Explore why dealing with risks needs to be part of the everyday process used to manage a project.
- Learn to outline the most common, pragmatic approaches to identifying risks specific to a project.
- Recall methods for qualifying and quantifying your risks to determine specific risks and manage their costs.
- Examine the primary considerations for a project risk plan and what components should be included in every plan.
- Assess techniques that help you identify the overall risk a project presents to your business.
- Examine several risk analysis and filtering examples that help ensure you've addressed individual risks properly on your project.