A Calculated Gamble

Ready, fire...Aim!!! Unless you are launching guided missiles, this is no way to begin an important undertaking. Yet some organizations are so eager to take the shot, they fail to locate the target—they fail to plan. Surprisingly, the most neglected area of planning is risk management.

It's surprising because projects are essentially gambles. An organization wagers X amount of resources to achieve Y result by Z date. When an organization’s decision to pursue a project is informed by an understanding of the required investment, the projected benefit, and the possible risks , the decision reflects a business choice. When the decision is made without regard to risk, it is a shot in the dark.

Effective organizations recognize that bad stuff may happen during a project. Risk management is about anticipating what might happen, examining and prioritizing those possible bad events, and figuring out what to do about them. That sounds simple enough, and in fact it can be pretty straightforward. Be warned though. Cultural barriers can make risk management difficult. Many organizations focus on projected benefits while downplaying project risks and forget a crucial reality: Any project can fail.

Effective organizations recognize that bad stuff may happen during a project. Risk management is about anticipating what might happen, examining and prioritizing those possible bad events, and figuring out what to do about them. That sounds simple enough, and in fact it can be pretty straightforward. Be warned though. Cultural barriers can make risk management difficult. Many organizations focus on projected benefits while downplaying project risks and forget a crucial reality: Any project can fail.

Any Project Can Fail
Imagine you are asked to coordinate an office construction project for your company. Armed with blueprints that clearly define the scope of your project, you enter a carefully negotiated contract with a reputable builder, which specifies the cost and schedule targets for the project. You're done, right?

Wrong. Before you finalize your moving plans, spike the ball in the end zone, and do your victory dance, remember that the project is not successfully completed yet. Labor problems, material delays, environmental lawsuits, zoning law changes, human errors, and weather could conceivably conspire to delay construction, increase costs, or bury your project altogether. Your contract may specify costs and dates, but that doesn't guarantee that your office will be ready when specified, that the costs will not change, or that the building constructed will exactly match your specifications. The contract may give you legal recourse, but it doesn't assure you the project will happen as defined. If the potential for disruption is not considered, it will be difficult to make informed decisions about insurance, contingencies, how much you