Early Watch – Proactive Risk Management

Posted on December 4, 2009

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Risk is often approached as a by product of project management, leading to unplanned delays and project overrun. The Risk Waterfall method enables proactive management of risk and define where the true focus of the team should be.

The principle is simple; it suggests a time based analysis of a quantitative risk index.

Most projects are today using tollgates to make decision focus on progress in reducing risk, from all sources. Major risk items must receive early program priority. The issue becomes the evaluation of a valid quantative risk index.

Risk is often considered as the product of probability of occurence and degree of impact. Also this definition is correct, it fails to address the natural complexity of projects such as interdependencies between risk and the time planned to resolve the risk.

The risk waterfall method is proposing to measure risk as

UNCERTAINTY * IMPACT * N° OF DEPENDENCIES * TIME CRITICALITY

Where :

  • Uncertainty & Impact can be evaluated with the scale of 1 to 5 (Low to High)
  • N° of dependencies is found with the N-Squared chart row by row (See graphic)
  • Time Criticality is the penalty for late resolution of a risk and is calculated as 2 power N, where N is the closest tollgate review after the time that the risk is planned to be resolved (With 6 tollgates N=0, 1, 2, 3, 4 or 5)

If  now you represent this new quantitive risk index on a time scale (with tollgates), you can easily decide which risk the team should focus on and elaborate a mitigation plan based on its complexity and our ability to fix it.

Of course this evaluation should be a continuous process; exceeding planned tolerance should trigger an unscheduled interim review.

I used a lot this tools during my carreer, and found it a powerful mechanism to better integrate risk management in project.