© 2007 Heuristic Management Systems Inc. Learning to Thrive in a Risk-averse Culture Chris Vandersluis President, HMS Software Understanding the nature of risk, and the relationship it has with your organizational culture

© 2007 Heuristic Management Systems Inc. HMS History 1984HMS Software founded. First project: automating the project office at Philips Information Systems and creating a project timesheet 1985HMS becomes a Welcom Software alliance partner 1994HMS releases TimeControl HMS releases TimeControl 2.0 for Windows with links to Microsoft Project 1995HMS joins Microsoft Project Solution Partner program 1997HMS becomes a Primavera Technology Alliance Partner 1997HMS releases TimeControl 3 as a client/server product 1999HMS releases first web timesheet interface for TimeControl 2001HMS releases TimeControl 4.0, a full web-based version 2004HMS named as a Premier Microsoft Project Solution Provider 2005HMS becomes a Microsoft Gold Certified Partner 2006HMS named as a “First to Market partner” by Microsoft 2007HMS releases TimeControl Industrial HMS releases TimeControl 5

© 2007 Heuristic Management Systems Inc. Defining Project Risk  Real-world Interpretation Risk management is the prevention of being blind-sided early and often by events not under the full control of project managers. It includes the timely response by project sponsors and senior mangers to serious risk that can adversely impact project success and business objectives  Classic Definition Risk management is the systematic process of identifying, analyzing, and responding to project risk. It includes maximizing the probability and consequences of positive events, while minimizing the probability and consequences of events adverse to project objectives

© 2007 Heuristic Management Systems Inc. Urban Legends About Risk  We tried managing risk, but projects still failed. Reality: You were either tracking the wrong risks, or failed to get management action on the most serious risks  Management never responds to risk, so why bother? Reality: If projects aren’t linked to business objectives, management often will not see the value in taking action (compared to other priorities)  We can’t really manage the unknown, so why try? Reality: Only an estimated 10% of all risks are actually unforeseeable

© 2007 Heuristic Management Systems Inc. Balance Risk Management Unaware of or Ignore Risks Micro- Managing All Known Risks Can Management quickly grasp which risks are a real threat to project & business objectives? Project Manager “Death Wish” 0% Effort 100% Effort Achieving Balance: Be aware of all known risks, but be proactive in managing the most serious threats

© 2007 Heuristic Management Systems Inc. Major Dimensions of Risk Project Risks  Cost, schedule, planning, resources, scope changes, dependencies, quality… Internal Risks *  Sponsorship, resource conflicts, legal, financial, contract issues… External Risks *  Economic downturn, competition, outsourcing, partner roles, regulatory… Technology Risks *  Disruptive technologies, integration, vendor reliability, IT competency… (*) Often not within the Project Manager’s control

© 2007 Heuristic Management Systems Inc. Practical Risk Tools  Standard PM Life Cycle with Phase Gate Reviews  Standard Risk Management Process  Accelerated Project Recovery Template  PERT Analysis Three templates that can help improve consistency and early warning response to serious project risks:

© 2007 Heuristic Management Systems Inc. Standardized PM Methodology Phase 2 Approval Phase 2: Planning Phase 2 Approval Cancel No Yes Phase 1: Initiating Phase 1 Approval No Cancel Yes No Project Charter Business Case Yes Identify Needs Proceed ? Phase 3: Execution No Issue/Risk Response Yes Reporting & Analysis Phase 3 Approval No Product Life Cycle Change Control Verify Scope Status OK? Phase 4: Closeout No Yes Go to ”Initiating” User Accept ? Validate Deliverable Begin Closeout Yes Upgrade ? Yes Manage “Product” Lessons & Archive Phase 4 Approval Project Closeout Controlling Time/Cost Baselines Develop Project Plan Pla n OK ? Time/Cost Estimates Improve & Measure Assess Risks Product Development Life Cycle Charter OK? User Satisfied ?

© 2007 Heuristic Management Systems Inc. Risk Insurance: A Project Recovery Plan

© 2007 Heuristic Management Systems Inc. Visualizing Scope, Time and Cost Scope: Work variance is greater than 20% of baseline work Time: Finish variance is greater than 20% of current duration Cost: Cost variance is greater than 20% of baseline cost

© 2007 Heuristic Management Systems Inc. Visualizing Scope, Time and Cost Multiple baselines can also be tracked (see above), and the time- scaled data can be imported directly into Excel for analysis.

© 2007 Heuristic Management Systems Inc. Greater Visibility to Your Project Risks Risk Probability and Severity: Quickly identify potential threats… even without using an automated Risk system Project Issues: Simple indicators can also be used to highlight serious, unresolved issues

© 2007 Heuristic Management Systems Inc. Standard Risk Management Process This process can be triggered when a High Probability and High Severity risk is identified that could lead to potential project failure.

© 2007 Heuristic Management Systems Inc. A Consistent PM Methodology This is just one example of how organizations can implement a standard PM Methodology that can be applied across all projects. The ultimate goal is repeatable project success, and improving overall PM Maturity.

© 2007 Heuristic Management Systems Inc. PERT Analysis sheet

© 2007 Heuristic Management Systems Inc. Multi-Bar PERT Gantt

© 2007 Heuristic Management Systems Inc. Summary  The primary goal of managing risk is to keep from being blind-sided by unexpected events… and to enable better decision-making with timely, accurate data  Virtually all project risks can be identified, but the list, priorities and actions should be updated regularly  For key decision-makers, less is usually more… as long as it’s kept action-oriented  If risks are overlooked, then shame on the project manager… if management refuses to act on well- defined, prioritized risks, then shame on management!

© 2007 Heuristic Management Systems Inc. Some of our clients

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