What is risk control?

The process of monitoring and controlling and keeping track of the identified and the unidentified risks is risk control. In this process we hope to identify risks that are no longer possible and risks that are coming due, as well as any new risks that may become evident. We will also monitor risk activity to make sure the risk plans have been carried out successfully. Problems that have been found out in the risk plan can help us adjust the plans for future risk activities.

Risk control and monitoring are part of the risk management process and must be started early in the project and continued until the end. As the project progresses, we will find that many of the risks will change, some will no longer be possible, others will happen and be disposed of, and new risks will be identified. In addition we will learn about the project and the risks associated with it and adjust our vision of individual risks.

The level of risk tolerance should be monitored as well. The attitude of the stakeholders will change during the course of the project. Communication with all stakeholders is important since it gives us a means of assessing changes in their risk tolerance.

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Risk control may involve changing the way we look at risk. There are several reasons why this might take place. The risk tolerance of the stakeholders may change; the risk tolerance of the project team may change. As the project progresses toward its completion, certain risks that were thought to be very important to the success of the project may become risks that are no longer thought of as being so important.

In the beginning of the space shuttle project, the heat-resistant ceramic tiles were originally thought of as being one of the major risks in the program. If the tiles were lost or their integrity was compromised, the heat of reentry, some 3,000 degrees Fahrenheit, could reach the airframe's aluminum structure and cause breakup of the ship. As time went by and NASA flew over one hundred missions with the space shuttle vehicles and the whole take-off and landing process became routine, the perceived severity of the risk diminished. During this time there were minor failures of the reentry tiles, but these failures proved to be minor repairs, and the shuttle vehicles suffered only minor damage. A program to develop a method of repairing risks in space was discontinued because it was deemed impractical. Part of the impracticality was probably because of the perceived reduction in the probability and impact of heat shield failures.

On February 1, 2003, just three days after the anniversary of the crash of the space shuttle Challenger, Columbia, the oldest space shuttle in the fleet, disintegrated on approach to landing. At this writing the investigations have hardly begun, but the heat shielding tiles are once again suspect because there is little that can go wrong on reentry except for a heat shield failure.

We see that during the project, the evaluation of the risk of heat shield failure began as a high risk. As time went on, the risk was revalued lower and lower. After the crash, the valuation of the risk has no doubt been raised higher than its former level.

In all projects, as we gain knowledge and experience about the project and its risks, we will change our attitude toward the risks in the project. This is natural and important. As we learn, we must change the level of effort we spend in certain areas or we will never have the resources, time, or money to complete any project.

A control system for risk is influenced by the organization the project is being managed under as well. In a project that is high in risk, we might have a person who is at a high level and is exclusively responsible for managing risks. On projects that are relatively routine by comparison, the risk manager may be the person responsible for the tasks that are most affected by the occurrence of a risk. These persons are responsible for communicating risk progress to the project manager and other affected stakeholders.

Risk audits can be used to document the effectiveness of the risk plans and the strategies that were used to mitigate, avoid, or transfer risks. A judgment can be made as to whether it was cost-effective to ignore the risks that were ignored.

Deviations in the project performance may indicate the effect of risks on the project. The earned value reporting system is helpful in identifying trends in performance on the project. Generally, schedule slippage and cost overruns are the result of some problems that have occurred. Trends in certain areas may indicate that risks are more severe than was anticipated or that new risks have taken place. One important product of the earned value reporting system is the indication of the cost and completion date at the end of the project. The sooner these slips in schedule or budget overruns can be communicated to the stakeholders, the better it will be for the project. Schedule slides and budget overruns that are severe enough can result in project termination.

A workaround is an unplanned response to a risk that was previously unidentified. These are the unknown risks that were discussed at the beginning of this chapter. They are also the risks that were passively accepted since these were deemed to be risks that would be ignored. Workarounds are paid for from funds from the contingency reserve or the management reserve, depending on whether the risk was identified and accepted or whether it was unknown until it occurred. In any case, the funding for the workaround comes out of these accounts and is put into the operating budget of the project, and a new baseline is created.

Since contingency plans and workarounds are not part of the project baselines until they occur, they should be initiated and approved by the execution of an official change notification. Remember that changes to the baselines should require an official change notification as the vehicle for showing the change in funding, schedules, and scope resulting in a new and current baseline.