Episode 171 Premium: The Formalization of Risk Management
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This episode is sponsored by The PMP Exam Simulator:
Last week, we had Scotty Bates (www.robbinsgioia.com) on the show and we discussed, how Program Management has changed over the past 30 years.
Today, he and I are going to take a look at how risk management has gone from a more or less informal project activity to the formalized discipline that it is today.
We'll look at the role that IT has played in this process, what the differences are between an issue & risk, how to convince your sponsors that risk management is necessary even on small and medium sized projects and how the attitude of us project managers to risk management has changed over the years.
Below are the first few pages of the transcript. The complete transcript is available to Premium subscribers only.
Cornelius Fichtner: Hello and welcome to this Premium Episode #171. I am Cornelius Fichtner. This is The Project Management Podcast™. Nice to have you with us.
You are listening to a premium episode. This means, as always, that only you, our paying premium subscribers get to hear it. Thank you very much for your financial support of The Project Management Podcast™.
Last week, we had Scotty Bates on the show and we discussed how Program Management has changed over the past 30 years. Today, he and I are going to take a look at how risk management has gone from a more or less informal project activity to the formalized discipline that it is today.
We'll look at the role that IT has played in this process, what the differences are between an issue and risk, how to convince your sponsors that risk management is necessary even on small and medium-sized projects and how the attitude of us project managers towards risk management has changed over the years.
And now, careful, there's an asteroid heading towards your project. Enjoy the interview.
Female voice: The Project Management Podcast’s feature Interview: Today with Scotty Bates, Executive Consultant for Robbins-Gioia.
Cornelius Fichtner: Hello Scotty and thank you very much for coming back on The Project Management Podcast™ to discuss the formalization of risk management in the past 30 years. Happy to have you back!
Scotty Bates: Well thank you, Cornelius. It’s good to be back and Happy New Year to you.
Cornelius Fichtner: Thank you! Well, let’s begin with the obvious question. What is the most significant change in regards to risk management that you have witnessed over the past 30 years?
Scotty Bates: Well, I think it’s much like just the fundamental change in program management as we’ve discussed previously, that’s the ability to use the information technology that’s available today that was not [existing] 30 years ago. There are quite a few risk management tools, application if you will out there that can be played at the enterprise level and at lower levels that just didn’t exist 30 years ago.
Cornelius Fichtner: So you’re saying that we don’t necessarily have to use just the spreadsheet. There are tools out there that we can use now.
Scotty Bates: Exactly and even at that, I found that there are some very large organizations that continue to use spreadsheets because they don’t want to invest the time and effort or money into looking at applications that exist to accomplish risk management. But some of that really [expounded] on whether they even had to put a process in place that addresses it or they just chose the least expensive route managing risks of the program.
Cornelius Fichtner: Alright! So that dovetails nicely into my next question that I have for you and that’s this here: Do you feel that risk management has changed during the last 30 years and is now being accepted more as a formal discipline by project managers, program managers?
Scotty Bates: I would say, absolutely it has. I think it was still there. There were obviously the need for program managers to manage risk in a program and if you remember the last time we discussed this. The fundamental role of a project manager was that of risk management so that really hasn’t changed but the ability to have the program continue to identify risk and attempt to mitigate those and manage those is much better today than in the past largely due to the ability of, I’ll say, the IT world, to provide applications and just technology to have that done.
Cornelius Fichtner: In the time before the interview when we discussed what we’re going to talk about, one of the sentences that you wrote was that you feel that the process is today, they are more comprehensive yet they are less time consuming. Is this mostly due to the influx of IT?
Scotty Bates: I think it’s partially. I don’t think it is mostly due to that. I think that the significant part of it, I think the other piece of this is that we, in general, have gone to a more I’ll say process-oriented environment and sometimes it’s not necessarily good but what I’m getting at is we formalized a lot of the disciplines, and to a greater extent, today than it was 30 years ago.
So let’s say we started looking at Deming’s principles 30 years ago, then the business process where engineering, [Mr. Champion] company, we’ve gotten to where we’re heavily using integrated product the process can use in trying to look at the business of program management from a process perspective and risk management is but one of those areas. But we’ve taken the idea of say a handful of risk that could be identified and managed upfront where that is certainly more formalized today. It has to be something supported at the top level and driven on down. Your risk assessment across the program, you can write that down within the program team and against the WBS structure if you will and really kind of down to where the controller counts are grouped within that structure and the control account managers then becoming risk managers for the risk that exist within those control accounts. That really wasn’t something that was done formally 30 years ago and there are tools, applications if you will that can be utilized to make the identification of risks, the management of risks, the status and updating risks a lot easier than was possible 30 years ago.
Well, there are efficiencies associated with that. Does it add a little bit of time and burden of the organization? Yes, but I think that’s essential if you’re really going to keep the potential risks or the risks that could become usually something that would impact a program in one area or another from happening. So that, I think that’s based on the fact that the process orientation in many of our disciplines is a lot more prevalent today than it was 30 years ago.
Cornelius Fichtner: I know you have a big background within the US government and that you feel also that risk management has gained greater acceptance and is more widespread now within the US government. Why do you feel that this is the case and why has it changed over the last 30 years?