What differentiates the high-performing companies from the low-performing ones? One of the more pertinent differences is that high-performing companies manage risk while they are engaging in project management. In an article for CFO.com, Mark A. Langley, President of the Project Management Institute (PMI), explores this idea of linking project management and risk management.
The Magic Combination
According to Langley, project management and risks are connected: “Projects are how you implement your strategy; project management is about having a structured approach to driving business results. If you’re not managing your projects, you’re not managing your risks.” A recent PMI survey revealed that 83 percent of high-performing organizations “always” or “often” manage risk with project management.
Linking project management and risk management gives the organization a new perspective for them to be able to see risks that are enterprise-wide. Additionally, not properly defining opportunities and risks has been cited as a primary reason for project failure.
Commitment and discipline are absolutely necessary for effective risk management. Interestingly, in the PMI survey two in three organizations stated that they had a formal risk-management process in place, but 40 percent cited that senior management fails to support this function. Leaders play an important role in endorsing risk management. This helps them to be a powerful asset to their team, as well as the organization as a whole.
Langley cautions that some risks are about the strategy, while others are rooted in the implementation of the strategy. Both types of risks are important and need to be acknowledged and managed. He shares a story he heard from John Furlong, CEO of the XXI Olympic Winter Games, about the risk of no snow. During the planning stages of the Olympic project, the committee examined around 90 years of data about the snowfall patterns in Vancouver. When no snow arrived by January 8th, they began to move the snow they had previously collected to cover the mountain. Unfortunately, there was an unseasonable warm front and all of the snow melted. This resulted in the committee needing to harvest snow from other compatible mountains and transplanting it where it needed to be.
All projects are laden with risks, making it vital to manage them in the most effective way possible. You can read the original article here: http://ww2.cfo.com/risk-management/2016/05/using-project-management-reduce-risk/