Risk That Could Derail Projects

Identifying Risk Connections That Could Derail Projects  

The World Economic Forum’s (WEF) annual Global Risk Report includes graphical representations of how the critical risks facing the world are interconnected. Some of the risks identified by the WEF report—prolonged infrastructure neglect, major systemic financial failure and pervasive entrenched corruption—raise red flags for any business involved in major infrastructure projects around the world.

Most project managers track costs and schedules, but risk is the all-important third dimension and can be hard to identify, record and analyze. Unlike the WEF, which includes business leaders, politicians and academics, construction companies don’t have the luxury of calling on a panel of global experts to identify risks. But, they are well-equipped with their own staff, partners and suppliers closest to the real risks and the opportunities affecting the business. The difficulty has been to develop a corporate culture in which staff call out the risks faced and can use a simple mechanism to easily record them. Now that technology is available to aid the recording process, management can drive the cultural change needed. 

Most important for a project with a fixed deadline, having the overall picture meant risks could be mitigated at the most appropriate and cost-effective point. Without such an approach, management would not know to support the decisions and promises being made, and different project team members might duplicate mitigation efforts, leading to unnecessary cost overruns. 

The other benefit of a single risk repository is management can visualize how risks are interconnected. The latest analysis tools can produce representations of the “risk universe” faced by the project or enterprise and show the associated “risk constellations” that are forming. As a result, management can see the cumulative effect of risks that might have been deemed as relatively unimportant at the individual project level. 

For example, every project might identify the lack of skilled resources as a risk. Bringing in temporary staff is a reasonable mitigation action if the risk only happens on a single project, but enough skilled people may not be available if it hits several projects simultaneously.