Some people seek out risk while others avoid it. Likewise, some organizations tolerate risk while other organizations minimize it. Whatever one’s particular strategy, we all face risk in our personal and work lives on a daily basis, and how we react to risk distinguishes those who are effective project managers from those who are less effective. In the project management world, those who are able to adeptly assess and respond to risk are more successful.
Risk implies a potential for events to work out in ways you cannot immediately predict. The reality of risk is very relevant to project management because, by definition, new projects create products and services that differ in some significant way from what has already been created. Risk and uncertainty are built into the DNA of project management, so knowing your own approach and attitude toward risk is critical. Often the project team taps the knowledge and skills of different people — changing the process that each is accustomed to — in order to generate a product or service that meets the needs of the future. These changes can affect not only the project, those on the team or those using the new product or service, but also the related products, processes, and business outcomes in other areas of the organization.
As a member of a project management team, it’s important to understand your own relationship to risk, as well as your organization’s view of risk. How do you approach risk in your day-to-day life? Do you routinely scan your environment for potential risk situations as you live, as you work, as you drive, and as you travel? Do you rehearse how you would act in an airplane crisis? Do you spend a few minutes to mentally walk yourself out of the hotel room in case the fire alarm sounds? Airline pilot “Sully” Sullenberger spent years rehearsing what he would do if his airplane engine failed over a body of water, as well as how he would lead a plane full of panicked people safely to shore. He studied not only aviation but also human psychology, because both were vital to his job.
It’s relatively easy to assess one’s own approach to risk. Are you proactive, or are you reactive? Those who take a proactive approach to risk assessment might be better at managing projects. Do you scan the behaviors of others when you walk down the street at night? Do you assess the subtle signals in people’s movements, stances, and facial expressions? Do you listen to the daily business reports and read the news to determine whether your job or your investments or your business environment are likely to be affected by current events? When you travel, do you walk around your vehicle before embarking on an important trip to be sure the parts are undamaged and ready to perform? When you back up, do you check to be sure no children or dogs or mail carriers are behind your car? If you do these things, you are more likely to be a good risk manager, at least when compared to the neighbor or co-worker who jumps into their car and backs up quickly while setting the GPS, pulling into traffic while daydreaming about the points they will make in this morning’s meeting.
I’ve heard it said that people, in general, do not like change—but a person’s attitude toward change has much to do with whether they can identify potential risk, identify acceptable ways of managing risk, and confidently move beyond the drumbeat of emerging and diminishing risk toward desired change. For those who are able to learn through experience, rising over the risks and problems that change often brings is experienced as a personal triumph. And then, of course, there are adrenaline junkies—we all know a few. They thrive on the challenge of climbing a mountain, scaling tall buildings, tightrope-walking across deep canyons, racing cars, and so on. These might be called “risk seekers.” But clearly, they are also risk managers, or they would not live to take the next challenge.
Aside from understanding your own approach to risk, it’s worthwhile to assess whether your views and approaches to risk match those of your employer or client. Some industries require better risk managers than others. There are entire industries that deal with major risks as a fundamental part of their business. Oil field development, demolition services, chemical removal or testing, nuclear power, and Antarctic expeditions have risk built into the work. Pilots who fly between continents and explorers in undeveloped terrain live with risk on every assignment. People working in these industries may be risk seekers, or they might be people who enjoy managing risk carefully. They can tolerate more risk than most because they trust their thorough preparation, their quick responses, their detailed knowledge of potential risks, and the risk management systems of their employer.
Workers in these industries may or may not themselves be risk managers for their organization, but they probably know the risks of their individual jobs very well. Businesses that function in high-risk environments address risk at every level of the business. Savvy organizations have already identified their “routine” risks and built them into their overall business plan, along with every project’s planning template and budget. Risks unique to each project are then added and monitored in the risk plan.
Organizations that face risk head-on are careful to put serious and experienced project managers into lead roles across the business. Managers who are risk-seekers or risk-tolerant (or both) will have a contingency fund and an escape plan in case risks become realities. The importance of these risk management plans will be discussed next week, in Part 2 of our series on risk.