Learn about the role of program managers in providing risk assessment, including how uncertainty acts as a multiplier.
- Within the program management world, risks are just unplanned events. A program has the word risk written all over it, because they are found everywhere. The program manager needs to look for risks at the organizational strategy level, the program level, and the project component level, including between the projects. Risk planning starts with identification. The easiest risks to identify are the known unknowns. We know those risks can happen and can plan accordingly.
What you do is put together what is called a risk contingency, which is some funding you have on the side in case one or more of the risks actually appear. There's a simple calculation you perform to figure out how much additional funding you might need. First off, you and your team estimate what the chances are of the risk occurring or the probability of it happening. Then you move on to the impact or cost you have within your risk. You then multiply the probability and the impact to determine what the risk means to you in financial terms.
Probability times impact equals risk cost. Now, your organization will not just give you this money for your program, they will only hand over the contingency if the risk is triggered or when it takes place. At the beginning of the second Iraq war, the secretary of defense, Donald Rumsfeld, talked about the unknown unknowns. These are the risks you don't know about. So, how do we cover the risks we cannot define? There is a separate contingency for these types of risks as well.
Very often, organizations have a standard percentage of a program budget that covers the unknown unknowns. And, of course, you have no chance of getting to this contingency unless one of these risks appear. Are there any risks that you don't try to manage? There can be. Let me give you an example. You cannot control the weather. Tomorrow might be sunny, but then it can rain or even snow. You can try to manage the weather, but you cannot control it, so you assume it might change, and learn to live with it.
If a risk is an unplanned event, we can have both positive and negative risks. If we finish ahead of time, or as cheaper than planned, that's a positive risk. Usually, the reverse takes place, we are either behind schedule or over budget. We manage these risks by continually monitoring how the projects are coming along and change our plans to fix the problem earlier. Our programs are risky. The program manager needs to come up with creative solutions to make sure these benefits are continuously being delivered.
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- What is program management?
- Who are program managers?
- Program versus project
- Program life-cycle phases
- Aligning programs to an organization's strategies
- Analyzing needs and planning programs
- Delivering and sustaining benefits from programs
- Working with program stakeholders
- Supporting program governance activities
- Managing program finances and resources
- Scheduling programs
- Managing program scope and quality