What is the essence of managing risk in a development project?

October 1999 Quick Tip

There are two critical factors to keep in mind in managing risk:
Risk must be managed proactively.
– Risk management must extend outside of engineering.

Proactive risk management is especially crucial when time to market is important. By starting early and addressing risk in an ongoing manner, you basically push the surprises earlier in the project, where they are less damaging to the schedule. Earlier awareness of risk issues provides you with more time to deal with them, which is essential as you shrink your schedules. Finally, because risk remedies get scarcer and more expensive as you get locked into prior project decisions, early risk resolution provides a richer, cheaper set of solutions.

Risk management is normally thought of as a technical issue. Engineers have many tools for dealing with risk. Unfortunately, this is the least lucrative place to look for risks. Numerous studies of product development failures show that most of these failures stem from market and business risks, not technical ones. When we assign risk management to the engineers, we are ignoring the majority of the issue.

In keeping with the proactive and cross-functional nature of risk, there are many ways of identifying and tracking project risks. Some examples appear in a recent article, “Managing Risk As Product Development Schedules Shrink.”

When project risk is treated proactively and cross-functionally, it becomes a central means of managing the whole project. It naturally becomes the basis of phase review discussions, and it takes on a project role no less than the project’s budget or schedule.

(c) Copyright 2013 Preston G. Smith. All Rights Reserved.