Seven Components to a Risk Management Plan

The Risk Management Plan describes how you will define and manage risk on the project. This document does not actually describe the risks and the responses. This document defines the process and techniques you will use to define the risks and the responses. The information in this plan includes:

• Roles and responsibilities. This section describes the leading and supporting roles in the risk management process. The project manager typically has overall responsibility for risk management, unless the team is large enough that this role can be delegated to another team member – perhaps a specialist. Third-party risk management teams may also be able to perform more independent, unbiased risk analyses of project than those from the sponsoring project team.
• Budgeting. Discuss your budget for risk management for the project. Since you may not know enough to request budget for risk management you can also describe the process that you will use to determine a risk management budget estimate.
• Timing. Defines when the initial risk assessment will be performed, as well as how often the risk management process will be conducted throughout the project life cycle. Results should be developed early enough to affect decisions.
• Scoring and interpretation. You should define risk scoring and interpretation methods appropriate for the type of the qualitative and quantitative risk analysis being performed. Methods and scoring must be determined in advance to ensure consistency.
• Thresholds. The threshold level is how you determine which risks are important enough to act upon.  The project manager, client, and sponsor may have a different risk threshold. The acceptable threshold forms the target against which the project team will analyze risks.
• Communication. Describe how the information on risk will be documented and communicated. This includes the risks themselves, the risk responses and the risk status.
• Tracking and Auditing. Document how all facets of risk activities will be recorded for the benefit of the current project, future needs, and lessons learned. Also describe if and how risk processes will be audited.

Be Proactive Managing a Project with Unrealistic Budget

If you are a project manager dealing with what you perceive to be an unrealistic budget, the first thing you will want to do is discuss this with your sponsor to see if there are any factors that are driving the project budget. For instance, there may be budgetary restrictions. If you are a vendor, it is possible your sales people committed to a fixed price for the project. In some cases your manager or sponsor might set an arbitrary budget without much justification. It does not necessarily make your challenge any easier, but you may find that by better understanding the reason for the fixed budget, you may have an easier time getting yourself and your team members motivated to achieve it. When you have a full project management methodology you will have tools and techniques to respond to these concerns.  There are a number of responses to a project with unrealistic budgets.

• Reduce scope. Talk to your sponsor about reducing the project scope. See if there are features and functionality that he can live without for now so that you can deliver the project within the budget specified.
• Identify and manage the budget as a project risk. Utilizing risk management will help better manage expectations early in the project and also be a way to gather input and ideas for ways that you might be able to hit the budget.
• Manage scope with zero tolerance. On many projects, you start with an aggressive budget and the situation gets worse because the project manager does not effectively manage scope. If you are on a project with an unrealistic budget to begin with, it is absolutely critical that you manage scope effectively and do not increase scope without an approved scope change request. Disciplined scope management will ensure that you only have to deliver what was originally promised, and that any approved changes are accompanied by a corresponding increase in budget and timeline.
• Look for process improvement opportunities. Lastly, take an honest look at your budget and your approach for executing the project. Talk to your team, clients, and manager about any ideas they may have for executing the project at a cheaper cost. This will get everyone thinking about being part of a solution. For instance, perhaps you could buy used equipment that will still meet your needs instead of new equipment. Perhaps you can change the process for gathering requirements so that they are competed earlier. This may result in budget savings as well.

Although it appears that you are being held accountable for budgets that are not within your control, you do have control over the processes you use to manage the project. Look at all aspects of project management to see if the unrealistic budget can be achieved.

Schedule Estimating Threshold

When you create a schedule you generally don’t know enough to enter all of the detailed activities the first time though. Instead, you identify large chunks of work first, and then break the larger chunks into smaller pieces. These smaller pieces are, in turn, broken down into still smaller and more discrete activities. This technique is referred to as creating a Work Breakdown Structure (WBS).

A question people ask is how small the activities should be before they do not need to be broken down further. This is referred to as your “estimating threshold”. Work can be broken down into smaller activities than the estimating threshold, but normally no work would be left at a higher level. The threshold can be different based on the size of your project and how well the work is understood.

You can use the following criteria as a guide. For a typical large project (say 5000 effort hours or more) the activities should be no longer than two weeks. Medium and small projects (say 1000 effort hours or less) should have activities no larger than one week. Remember that this threshold is an upper limit. You can break the activities down further if you want.

Assigning work that is smaller than your threshold allows the work to be more manageable. Think about it. When you assign work to a team member you don’t know for sure how he is progressing until the due date (or the completion date if it comes first). (Yes, you can track progress if the work proceeds linearly – like painting a wall. But many of us work in the knowledge business (IT, Sales, Finance) and it is not easy to know exactly how the work is progressing.)

Let’s look at an example. If you assign a team member work that is due in four weeks, you are not going to know for sure whether the work is on time until the four-week deadline. The worker may tell you things are on track, but you don’t really know for sure until the due date. If the work is completed you will know you are on track. If the work is late you will know it then as well. However, four weeks (or longer) is too long to wait to know if the work is on track. A better approach is to break the four-week activity into four one-week activities. Then you will know after the first week if the work is on time or not.

If at all possible you want to try to have schedule work completed within two weeks. If you give someone work that takes four weeks or longer there is just too much time before you really know if things are on-track or not. It is much better for you if you can keep the schedule feedback loop to no more than two weeks.

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Manage the Schedule for Small Projects

All projects need a schedule. If you have a small project perhaps the schedule is a simple checklist or Excel spreadsheet. As projects get larger they need more formal scheduling templates and tools.

The processes you use to manage a schedule also vary depending on the size of the project. Large projects need a lot of schedule management rigor. Small projects can use a lighter process. The following steps can be used to mage the schedule of a small project.

1. Review the schedule on a weekly basis.
2. Identify activities that have been completed during the previous week and update the schedule to show they are finished.
3. Determine whether there are activities that should be completed, but are not. Work with the individual that is assigned to the work see what is going on. Determine how much additional effort and duration are needed to complete the work and update the schedule accordingly.
4. Evaluate the remaining work to see if the project will be completed within the original duration. You may find that even though some activities may be completing later than planned, other activities may be completing early and the overall schedule may still be okay.
5. If your project is trending behind schedule, think of schedule management techniques you can apply to get back on schedule. Raise a schedule risk in your status report if the original deadline appears to be in jeopardy.
6. Adjust the schedule so that it reflects the remaining work to be completed, and is as accurate as possible.

Since this is a process for a small project, it would be unusual to have major problems with the schedule. The consequences of problems on small projects are generally small as well.

Seven Steps for a Project Quality Review

In some cases, such as a government project, periodic audits may be called for as a part of the overall contract. This “outside party” could be any qualified person outside of the project manager. In some cases, your organization may have an internal project audit specialist. It is possible that the Project Director or the Project Sponsor could also perform this audit. The outside party could be an outside contractor or consultant, but they do not need to be.

The audit itself focuses on whether effective project management processes are being utilized and whether the project appears to be on-track. A project audit asks questions about the processes used to manage the project and build deliverables. The audit can follow this process:

1. Notify the parties (Auditor) – The auditor notifies the project manager of the upcoming audit and schedules a convenient time and place. Other key stakeholders are notified of the audit as well.
2. Prepare for the audit (Auditor) – The auditor may request certain information up-front. The auditor might also ask the project manager to be prepared to discuss certain aspects of the project. This ensures that the actual meeting time is as productive as possible.
3. Perform initial interview (Auditor, Project Manager) – During the initial meeting, the auditor asks the appropriate questions to ensure the project is on-track. If there are any areas that are not on track, the auditor notes them as such.
4. Perform as many other interviews as necessary (optional)(Auditor, Project Team) – On many projects, the audit might culminate in the initial meeting. If the project is large or complex, the auditor might need to perform follow-up analysis. This includes meeting with other team members and clients, and reviewing further documentation.
5. Document the findings (Auditor) – The auditor documents the status and the processes used on this project against best practices. If the organization has standards and policies in place for managing projects, the auditor determines whether any of these are not being followed on the audited project. The auditor also makes recommendations on things that can be done to provide more effective and proactive management of the project.
6. Review draft audit report (Auditor, Project Manager) – The auditor and the project manager meet again to go over the initial findings. This auditor describes any project management deficiencies and recommendations for changes. This review also provides an opportunity for the project manager to provide a rebuttal when necessary. The initial audit findings might be modified based on specific feedback from the project manager.
7. Issue final report (Auditor) – The auditor issues a final report of findings and recommendations. The project manager may also issue a formal response to the audit. In the formal response, the project manager can accept points and discuss plans to implement them. The project manager may also voice his disagreement with certain audit points, and explain his reason why. In these cases, the project sponsor and the project director (manager of the project manager) will need to decide if the project manager should comply with the recommendations or not.