Why projects fail – inadequate risk management

According to recent statistics by the Project Management Institute (PMI), nearly 70% of projects fail to meet their initial goals, deadlines, or budgets. In short, they fail to meet their objectives. This is not a new problem. Countless articles over the years have reached similar conclusions.

Although some of these articles suggest reasons, they often miss the point.

ISO 31000 defines risk as ‘the effect of uncertainty on objectives’. (If everything was certain then we would meet our objectives – wouldn’t that be nice!). The ISO definition probably needs strengthening:

The ONLY reason for project failure is inadequate risk management.

This is despite a growing profession of risk management. So why is risk management so poor? There are three headlines.

The first is that risk managers are tending to get swept up in working directly with the C-suite. Their risk role is also often diluted by other areas such as compliance and audit and ‘emerging areas of risk’ such as sustainability, carbon footprint etc. The result is that risks at lower levels of management such as projects receive reduced (or no) attention. (Want evidence? Ask yourself who in your organisation knows the current high risks across all projects?) This C-suite focus is often exacerbated by software that incorporates compliance, audit etc. Such software is often complex and expensive to use.

The second is the lack of a risk management system geared to projects (or indeed any initiative geared to achieving an objective). The system needs to be efficient so that user’s time is not only valued but encourages users to proactively manage risks. Let’s consider the amount of data that is managed. All that is needed is:

• A Risk Breakdown Structure (RBS). This helps with the identification of risks and subsequent ‘cutting and dicing’ so managers can get to the specific areas of interest to them – ie support integration. (2)
• A simple description of a risk. There is a risk ‘that something happens…that leads to an impact on objectives’. (1)
• Analysis in terms of Likelihood and Impacts so as to prioritise which risks to address first. (2)
• Treatments (mitigation measures) including an owner and action date. (3)

That is eight pieces of data (see brackets). Many will ask about ‘Appetite, Risk Owner, Residual risk etc but they are superfluous and detract from efficiency. The only question that needs to be asked is ‘Can I manage risks with the above 8 items?’ The answer to that is YES so anything else is a waste.

Finally, there is a need for software that supports the above. Risk management is essentially a one-to-many communication channel. One Project Manager is responsible for managing risks and many in the organisation (and sometimes outside) need to access data pertinent to them. That points to a cloud solution. To maintain efficiency data should be managed on one screen. Similarly report users should be able to access the data they require through a single screen.

The above system is readily available. What is needed is someone within an organisation to take up the responsibility. Rather than an overloaded Risk Manager adoption of such a system would ideally be by the PMO. If an organisation does not have a PMO then by individual projects. After all PMOs and Project Managers will be the greatest beneficiaries and the ones most interested in reducing project failures.

Want to know more? Then visit this link: Time Saving Risk Management or get in touch to attend a free webinar.