ABSTRACT
Risks abound, especially on large and complex projects. The reason is simple – it is more difficult to plan for “what may” happen especially when risk events are beyond the view of the project team. The detrimental effects of risks are in the news every day. For example, in the Summer of 2017, London just suffered one of the single worst high-rise building fires in its history. The fire at Grenfell Tower killed 72 people and injured 70 more people, and one of the most significant contributors to the rapid spread of the fire is the building cladding. In the aftermath, the U.K. government tested 34 samples of similar cladding from 17 different locations, and 100% of these building materials failed safety tests. To prevent potential disasters, less than 10 days after the fire, the government ordered the evaluation of about 400 buildings impacting nearly 4,000 residents. The very sad part of the story is that flammable building clad responsible for the rapid spread of fire was well known and documented. More recently, in 2018 and 2019, Boeing 737 Max 8 had two crashes about half years apart killing a total of 346 people onboard those plans. In the second case, Ethiopian Airline Flight 302 hurled toward the ground at nearly 600 miles per hour, completely obliterated the plane. In the aftermath, all aviation authorities around the world grounded the plane. Even though blames are contributed by many parties, Boeing’s poor project management especially with regard to a number of risky decisions in reducing training, reliance on a single sensor for flight control, and overconfidence in its Maneuvering Characteristics Augmentation System (MCAS) was the prime contributor to those crashes. At the 188time of writing this book, Boeing’s 737 Max 8 remains grounded, and the stock price is nearly 24% below its peak in early 2019.
Even though risks are typically seen as negative in everyday affairs, on projects, risks can also be positive. For example, drug companies often started to mass produce drugs that are poised to be approved by the Food and Drug Administration. Even though the approval has not happened and there is often moderate probability that the approval is not forthcoming, the opportunity to make a profit from another blockbuster drug is too attractive to miss, especially when the patent duration is limited.
This chapter focuses on project risk planning, identifying, analyzing, and responding to project risk. Processes for implementing risk response plans and monitoring and controlling their effectiveness are discussed. The project manager’s aim to exploit positive risks (opportunities) and minimize negative risks (threats) is emphasized, including known risks and unknown risks.
This chapter centers its attention on three important risk-related questions:
What is so important about managing project risks?
How to manage positive risks (opportunities) and negative risks (threats)?
How to best analyze risks using quantitative or qualitative tools?
