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This Interview with David Hillson was recorded at the PMI Global Congress 2014 in Phoenix, Arizona.

When most people talk about risk management, they are thinking only about uncertain future events that would have a negative effect on achievement of project time and cost objectives. However the definition of risk in the risk chapter of A Guide to the Project Management Body of Knowledge includes much more than mere threats to the project schedule or budget, and other risk standards agree. If we limit our view of risk to look at only one part of the risk picture, we will not be proactively managing all the risks that might affect the success of our project, and we will end up taking risks without knowing it.

In this interview with David Hillso we explore the other types of risk that are usually missed from the typical risk process. Drawing on leading thinking and current best practice, we explore the full range of project risks that need to be managed, starting from the proto-definition of risk as “uncertainty that matters”.

Risks that matter include those with positive effects as well as those with negative effects (opportunities as well as threats). They can also affect any project objective, not just time or cost.

In addition, uncertainty in projects arises from much more than future uncertain events (“stochastic risks”). Other sources of uncertainty include variability (“aleatoric risk”), ambiguity (“epistemic risk”), and emergence (“ontological risk”).

With illustrative examples of each type of risk, and an in-depth look at risk responses in project management, this interview helps us to identify all types of risk that might affect our projects, and offers ways for us to tackle them effectively.

Episode Transcript

Below are the first few pages of the transcript. The complete transcript is available to Premium subscribers only.

Podcast Introduction

Cornelius Fichtner: You are listening to The Project Management Podcast™ at www.pm-podcast.com and once again, we are coming to you live from the PMI Global Congress 2014, and we are here at the PMI® Bookstore in the exhibition hall and with me is David Hillson.

Podcast Interview

Cornelius Fichtner:Hello, David, welcome.

David Hillson: Hi, Cornelius. It's nice to see you again.

Cornelius Fichtner: Yes, very nice to see you. Your topic was or is How to Manage the Risks You Didn’t Know You Were Taking. But before we get into that, you're from England. What are you doing here? This is the North American version of the Global Congress. Why did you travel all the way?

David Hillson: Yes, it is a long way, isn’t it? I think it was 11-hour flight and there is an 8-hour time difference and so I think I'm just about ready to go to bed although it's lunch time.

I love these congresses because you have the opportunity with thousands of people to share your ideas, to learn from other thought leaders. And so the whole atmosphere is part of my personal development. And then as a speaker, part of my giving back to the profession to share some of my ideas with other people who are interested and here to learn.

Cornelius Fichtner: When we talk about giving back, how about PMI giving back to you? I know PMI does pay the speaker's attendance here so you didn’t have to pay the attendance fee. But did they cover any of your travel expenses because you're coming from so far away?

David Hillson: No, they didn’t. That's a policy that we've asked the speakers before some conferences too. So it is an investment for me personally. Some of us have larger companies that we can charge for the expenses. The risk doctor partnership is quite a small outfit. There's only 24 of us around the world. And so for us, it's a significant investment to take effectively around the world the air fare, to pay for our own hotels and meals and so on. But for me, it's definitely worth it for those two reasons giving something back myself and also learning from others.

Cornelius Fichtner: Excellent! "How to Manage Your Risks You Didn’t Know You Were Taking" is your presentation. You've already given the presentation right?

David Hillson: No, no. This is completely new.

Cornelius Fichtner: No, I mean at the congress.

David Hillson: Yes, the presentation was given yesterday at 11:30 in the morning.

Cornelius Fichtner: How many people are in attendance?

David Hillson: I think I had about 200.

Cornelius Fichtner: Oh, that's nice. That is a very…

David Hillson: That is about 10% of the Congress.

Cornelius Fichtner: Yes, considering the competition there is with, the many tracks that are running simultaneously. So why does it matter? Why do I have to know how to manage the risks that I didn’t know about?

David Hillson: Well, the difference between success and failure is how well we manage our risks because we all plan to succeed and then the things that drive us off track which make the difference between us being on time or not on time, on budget or not on budget and so on, are the things that we didn’t plan for, the things that we weren't expecting, the things that came up and surprised us. And those things of course are risks.

So if we had been able to see them in advance and position ourselves and prepare for them and then deal with them before they arrive, then they wouldn’t have been so many risks happening and we would have stayed closer to the plan and be more likely to succeed. So for me, the difference between success and failure lies in our ability to identify and manage risk effectively. So it really does matter to know what risks are out there and what could affect us.

Cornelius Fichtner: In your paper, you talked about the problem with the typical project risk management approach. So what is the problem?

David Hillson: Well, the title "How to Manage the Risks You Didn’t Know You Were Taking" is suggesting that we have a blinker or we have blinders on so we can't see the full scope of the risk landscape. We're focusing on a subset of the risks that really could affect us. And so my concern is just to broaden people's vision and the problem is at the moment it's very narrow.

So I think the problem with a typical process is that when we think about defining risk, you say to most people: What is a risk? They say: A bad event in the future that might happen and if it does happen, then it's going to hit my budget and hit my timeline. So we have one very narrow view of risk, an uncertain future events with a potential bad consequence on time or cost. And I think that's just a huge limitation on the risks that really could affect you.

Cornelius Fichtner: So what are the risks that you would make us consider?

David Hillson: Well, I start with three simple words and we might have talked about this in one of our other podcasts.

Cornelius Fichtner: Probably have.

David Hillson: The risk is defined for me as uncertainty that matters.

Cornelius Fichtner: Uncertainty that matters, okay.

David Hillson: There are a million or billion infinite uncertainties in the world. But we don’t write them all down in our risk register.

Cornelius Fichtner: Right.

David Hillson: We only write down the subset. So how do we filter all those millions or billions of uncertainties and decide which ones we need to know about? Which ones we write down and try to manage and tell people about? Which are the uncertainties are risks?

All risks are uncertain but not all uncertainties are risks. So what we want to know for our projects and for our businesses, actually for our personal lives, is 'what are the uncertainties that matter because most of them don’t matter?' Is it going to rain in Kazakhstan tomorrow afternoon? I don’t know. I don’t care.

Cornelius Fichtner: Does it matter for my project?

Above are the first few pages of the transcript. The complete PDF transcript is available to Premium subscribers only.