Risk Analysis Basics

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Why Do Risk Analysis?
You do risk analysis for only one reason: Would you manage the project differently if any of your risks happened? I especially look for risks that could put us out of business, or prevent us from shipping product.

When I work with people on generating risk scenarios in the project, I ask them to look at risks in these areas:

  • Risks to getting the project completed—The machine availability problem above is a great example of that risk
  • Risks to using the product in the field—I find use cases or other forms of customer-scenario generation work well here
  • Risks to the business from using the product in the field—If your customers find this problem, could their reaction impair your ability to do business

Then you make plans to deal with the risks you never want to come true. In Tim's project, for example, the lack of the machine when it was needed would prevent them from doing load testing. How bad a problem is that, really? Would Tim's company have shipped anyway? If so, then there was no risk. I'm not saying this is good business, but if Tim's company already decided that the potential down side, the severity, is not high enough, then there is only limited business risk if a server is not available and the testing is not done.

Risk analysis can't be exact. If it were exact, you'd be predicting the future (and by the way, if you figure out how to predict the future, please do let me know). But having a place to start the discussion about what the problem is, and how it affects the project, is much better than the frustrating and inadequate dialog we saw at the beginning of this column.

About the author

Johanna Rothman's picture Johanna Rothman

Johanna Rothman, known as the “Pragmatic Manager,” helps organizational leaders see problems and risks in their product development. She helps them recognize potential “gotchas,” seize opportunities, and remove impediments. Johanna was the Agile 2009 conference chair. She is the technical editor for Agile Connection and the author of these books:

  • Manage Your Job Search
  • Hiring Geeks That Fit
  • Manage Your Project Portfolio: Increase Your Capacity and Finish More Projects
  • The 2008 Jolt Productivity award-winning Manage It! Your Guide to Modern, Pragmatic Project Management
  • Behind Closed Doors: Secrets of Great Management
  • Hiring the Best Knowledge Workers, Techies & Nerds: The Secrets and Science of Hiring Technical People

Johanna is working on a book about agile program management. She writes columns for Stickyminds.com and projectmanagementcom and blogs on her website, jrothman.com, as well on createadaptablelife.com.

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