Minimize Risk and Embrace a New Level of Success

By Dan Patterson PhD, PMP

The presence of risk within an organization is not a new concept. In fact as part of the underlying mission of pursuing opportunities comes corresponding threats that can impact both projects and shareholder value alike. What is new however, is the means by which such risks can be managed as part of an organization’s ongoing operations and projects.

In the beginning, there was risk.
The key to project and organizational success is understanding the difference between managed risk and unmanaged risk. Risk can rarely be eliminated but if it can be properly understood and reactive measures planned accordingly, then its impact can be significantly reduced.

Linked to this growing recognition of the importance of risk are evolving various reporting mandates such as Sarbanes Oxley. Risk management is no longer an optional procedure or a “nice-to-have” option – its as important as reporting the bottom line in your annual shareholder report.

Modern management techniques today provide powerful means of determining the value of projects within an organizations portfolio. The project cost, the Net Present Value, the Internal Rate of Return and the Return on Investment are all common project portfolio metrics. While heavily relied upon when determining which projects should get the green light for funding, these predictive measures rarely end up being representative of the final outcome of the project.

Today, there is hope.
IT projects are infamous for being delivered late and over budget. A report referenced in the famous Standish Group Chaos Report questioned why bridges are typically built on time, to budget and do not fall down yet software projects rarely come in on time or budget and always break down. The leading cause of this within IT and software projects is poorly managed scope. Scope is continually being threatened by change and uncertainty and the inability to manage this risk is only now being properly recognized.

More recently in late 2004, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) released their “Enterprise Risk Management-an integrated framework” which provides direction on how to manage organizational risk. This also forms the basis for the risk section 404 of Sarbanes Oxley. Likewise, Pertmaster’s risk management software is also built upon such widely accepted risk management methodologies and approaches.

Tomorrow is certain.
Providing a means of rolling up project risk from the very detailed level all the way through to the portfolio, program and organizational level, Pertmaster provides not only a detailed schedule risk analysis, but cost risk analysis across projects as well. Through a Monte Carlo analytics engine, Pertmaster determines the chance of project completion on time and to budget together with calculating sufficient contingency so as to minimize exposure to potential project failure.

This capability is being used extensively throughout the world on various project types and sizes from multi-million dollar oil exploration projects to short-term R&D IT projects. The combination of risk analytics and executive-level risk reporting makes Pertmaster uniquely valuable to both project managers and schedulers as well as in the board room for executives and CxO’s.

Denise McFather, project controls manager at Pantex, one of the world’s largest defense contractors stated, “Before using Pertmaster, we struggled to describe to upper management the reality of the schedule dates – it was impossible to justify our project plans to them and as such they carried little authority. Being responsible for over ten major capital expenditure projects, I needed a tool that would assist in determining whether our plans were realistic and in the cases where they were not an indication as to why not. Pertmaster not only provided this information but also allowed me to quickly run “what if..” analysis