RiskTrak
Enterprise-Wide Risk Management

Risk Management Is Just Appearing On The Corporate Radar

In 1994 The Standish Group released a disturbing report that found only 16% of all IT projects attempted successfully occur within the "triple constraint" of cost, time, and user requirements. While the Project Management Institute (PMI) - the largest project management professional association in the world - had listed Risk Management as a critical success factor as early as 1987, the publicity of the Standish report succeeded in shaking up corporate America. But to what extent?

In a 1997 PMI-funded study of Fortune 500 companies, evaluating the quality of project management and the success of their projects, conducted by Dr. C. William Ibbs, PMI Education Foundation, Director of Research and professor of project management at UC Berkeley, "Risk Management was notoriously weak."

Ibbs’ findings clearly showed that the money companies spend on improving project management, including Risk Management, is recouped later when projects come in on time and on budget.

The study benchmarked these companies with regard to the eight knowledge areas generally accepted as the "Project Management Body of Knowledge" (PMBOK). In the most telling finding of the study:

"Risk Management's project management maturity level was the lowest among all eight knowledge areas. Risk Management was the only knowledge area in which

the overall project management maturity level was below three (immature). Consequently, companies should put more effort into the risk management area."

- C. William Ibbs, Ph.D.

Fortunately, that effort finally is beginning to happen. Within PMI, the newest Specific Interest Group to be chartered, is one devoted solely to the practice of Risk Management. The American Project Management Forum is also planning to hold a conference later this year, which will focus heavily Risk Management.

Risk Management agencies are beginning to appear everywhere from the U.S. Department of Agriculture to big six consulting firms. However, in-house expertise remains in relatively short supply, a testament to the multi-million dollar training industry that has sprung up to teach risk management. As a result, there are not many "lessons learned" available for those organizations now taking the plunge. Of course, with the growing interest in risk management has now come a growing interest in risk management tools.

The Dearth Of Risk Management Tools In The Marketplace

Once organizations move from considering risk management as purely an application of actuarial science or financial hedge strategies, they need to understand risk management from a project perspective.

"Project risk management is a process that seeks to maximize the results of positive events and to minimize the consequences of adverse events. It should identify, analyze and respond to project risk. Risk identification, quantification, response development, and response control are included in this knowledge area."

- C. William Ibbs, Ph.D.

This leads to a challenge in finding appropriate tools for providing effective risk management. Add-on products to popular spreadsheet and project scheduling software generally only deal with statistical, Monte-Carlo simulations, or try to link those packages and the automated functions they contain to simple databases.

Unfortunately, the breadth and depth of data associated with true enterprise-wide risk management quickly overwhelms the capacities of these systems. A testimonial in the next section of this document touches on this point as well.

Also adding to the challenge, many companies make the mistake of having their risk management solution become an unbreakable subset of their enterprise-wide project management systems. This could force the organization to revamp the entire way they currently do business.

This is a considerable drawback to those organizations seeking simply to add risk management to their existing tool set. A flexible stand-alone risk management solution is generally the best choice for clean integration, within an organization’s existing systems and processes.

How One International Corporation Implemented Risk Management

ABC (a fictional acronym for a real company) is a typical example of how organizations move to Risk Management. A Senior Risk Manager in their National Risk Practice, discusses how it was accomplished in this document from April, 1998:

"ABC recognized approximately 3 years ago the benefit of assessing risk on opportunities prior to the final sale being made and then working to manage risk throughout the life of the opportunity. To support that effort the ABC National Risk Practice was born. This practice was given a very specific charter to focus on risk management and not dilute our efforts in performing general project management activities.

The practice was staffed with 20-30 senior project managers with at least 10 years of project management experience in a variety of industries and project types. The practice developed a formal certification and mentoring program to train new risk managers regardless of the level of experience prior to entering the National Risk Practice. The practice also engaged in an information/marketing program to create a level of understanding of what risk is, how it can affect projects at various stages, and how the National Risk Practice can save our company time and money. To facilitate the process of obtaining risk management services, a centralized help desk and an 800 number were created. It is clearly understood throughout ABC that the 800 number is the place where help is available to assist in assessing and managing risk.

From the start of the practice, two problem areas were risk tracking and communication. We often found that we had no reliable, easy way to manage the risk information. When we performed risk assessments, we had a problem getting the information in the hands of the people who needed it in a timely fashion. Projects are constantly evolving and we often found new project members that were ill informed about the project risk. We also were confronted with a problem of tracking all of the risk assessments and updates. Because of our volume of work, we found that it was difficult to put risk management information from previous projects in the hands of those currently in need whether it be risk managers or senior ABC management.

We had tried to solve our problems with some end user applications such as Microsoft Word, Excel, and Exchange. We tried for quite a long time to create an Microsoft Access application that would reside on a central server, be available 7x24, and provide information in a number of views. Having been the owner of the application, I can tell you it failed horribly and was a costly mistake. We encountered nothing but problems and ultimately suffered a loss in productivity because of it.

Finally, we found RiskTrak. We didn’t know that a true risk management application existed commercially. Previously, we had only found applications that focused just on Monte Carlo simulations and did not address and facilitate the risk management process.

ABC purchased RiskTrak in 1997 and we have been installing it throughout the various practices. We are currently in the process of developing customized interview experts so that we can take maximum advantage of RiskTrak’s functionality. RiskTrak’s features have solved many of our known problems such as communicating and tracking risk information. However, RiskTrak has also solved some problems we didn’t know existed. We now have an easy way to ensure the quality of our risk assessments and a tool that speeds the training of new risk managers. Being a completely virtual practice dealing with a large, multi-national corporation, RiskTrak is the tool that has been missing from our toolbox."

It’s rewarding to see the marketplace finally come alive with the need for Risk Management, and RST intends to keep RiskTrak at the forefront of the industry. Risk Management is important not only to us, but also to everyone who depends on the successful completion of their projects.

"Risk Assessment Groups will grow in numbers in the foreseeable future. They are still in the ramp-up stage. But as they demonstrate their value, organization-by-organization, we will see more and more organizations using them. By anticipating problems before they arise, they enable their organizations to operate in a proactive manner, and thus control events rather than be controlled by them."

- J. Davidson Frame, Ph.D.

Director of the International Center for Project Management Excellence at George Washington University



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