Managing risks in today’s high-pressured, take-no-prisoners project management world is a vital process that can easily determine the success or failure of an organisation striving to achieve its strategic objectives, writes Lee R Lambert.

There used to be an old TV advert for an oil company on US television – with the punchline: 'Pay me now, or pay me later!'

It dealt with the need to change a car’s oil. The gist of it was that you could pay the company a small amount now ($39) or be negligent and end up paying considerably more later – about a hundred times more – to replace the car’s blown engine. The same logic applies to a lax risk management approach. Pay now, or pay (a lot more) later!

Managing risks in today’s high-pressured, take-no-prisoners project management world is a vital process that can easily determine the success or failure of an organisation striving to achieve its strategic objectives.

'Don’t let the failure to manage risk events prevent you from delivering high-quality projects on time and within budget.'

Don’t let the failure to manage risk events prevent you from delivering high-quality projects on time and within budget.

Risk management demands a comprehensive capability of generating and formatting information that facilitates the process.

The secret to effective risk management is the availability of high-quality, thoroughly integrated and easily accessible decision support information.

The decision support information that empowers project managers and executives alike doesn’t just happen!

The organisation must invest adequate time and resources to create the foundation for identifying and managing project risks.

Good risk management is based on good information

Identifying potential project risk events is easy. Managing them is how project managers demonstrate their prowess.

Being consistently successful in managing risks is directly dependent on the product of a project and portfolio management (PPM) process-information.

Information that supports estimating the potential impact of the risk event on the project or other components of the organisation. Additionally, the PPM supports evaluating the probability of the risk event actually occurring.

Once the analysis of the information is complete, including forecasting and/or trending, the approach to managing the risk must be chosen.

There are many choices regarding the handling of a risk event. The project manager can choose to Avoid, Accept, Transfer or Mitigate the specific risk event.

The impact of the handling technique selected can be easily assessed using the PPM to assure it is the most effective choice with the least impact.

Is your organisational leadership enabling project managers to manage risk or are they merely creating the illusion of risk management?

So you purchase a sophisticated PPM solution. Done! That was easy! Not so fast my friend! The power of a good PPM solution is unquestionable.

If the users are properly trained on how to use the power of the PPM and the senior decision makers are willing to actually 'make decisions' you will have found the pot of gold at the end of the rainbow.

Unfortunately, history shows that it takes time to fully realise the benefits. Users must be committed to the use of the PPM. No excuse for not using the PPM is acceptable!

Remember, just because you have implemented a PPM doesn’t mean it will be accepted by the user community!

Answers you should get before tackling risk management

If you and your organisation have an objective of improving risk management capability remember this:
1.) In order to effectively manage risks the organisation must invest the time creating a consistent risk management methodology that incorporates input from throughout the organisation.
2.) Once the risk management process has been established the most efficient and cost effective PPM solution necessary to support the process must be selected and implemented.
3.) ALL users in the organisation must be trained in the capability and use of the PPM system.

Lee R Lambert is one of only 70 PMI fellows worldwide and a champion of Cora Systems. To register for Lee’s risk management webinar (October 23), click here: http://bit.ly/PPMrisk.