Having set the stage for the importance of risk management as the key to project success, lets look at the different phases of a project and the risks involved in each. Projects as a temporary endeavor are undertaken to fulfill a vision or an idea. Selection of a project to execute is commonly viewed as the start of a project and so is the start of risk mitigation. Some of the areas of risks during this phase are
- Business objectives of the project
- Risk profile of the organization
All projects need to have a clear business objective and how the project outcome meets the objective. This helps determine whether the investments required to execute the project brings value to the business. Without a clear business objective and not knowing the value added to the business, any project however well executed and delivered will be deemed not successful. In order to minimize this risk, all projects should have a clearly defined business objective and a high level ROI calculated. This will help in selecting the projects which adds real value to business. At the project execution level, project managers and the project team need to understand very well why the project was selected and how the project is adding value to the business. This will help in identifying the risk areas within the project which would impact not meeting the set business objectives and the ROI.
The other major area of risk during the project selection phase is the risk profile of the organization. Risk profile of the organization specifically the key stake holders and the executives need to be taken into consideration while selecting a project and also the mix of projects for execution. If an organization profile is to be cautious, then the project selection should take that into consideration and select more projects ideas of which are definitely adding value to the business immediately than which has the potential for value in the future. If a vision or idea is going to add value in the future, in order to match the risk profile of the organization, it can be planned to be implemented in an incremental fashion. Similarly the mix of projects selected by an organization should reflect the organizations risk profile. With out taking into consideration the risk profile, projects can be deemed unsuccessful even if they are delivered meeting all the execution parameters like cost, quality and time. At the project execution level, the project managers and to an extent the project team need to very well understand the risk profile of the project stakeholders and the sponsors.
Please share other areas you may have come across in the project selection phase resulting in unsuccessful projects.