The hardest part
about risk management is that it is a perception. It is one’s own view of
factors that can affect the progress. Since this is a perception or perceived
reality, it is different from person to person and thus organization to
organization.
The above picture
is from the course material. We can see that risk perception is influenced by
factors like experience, knowledge, skill and confidence etc. So, if I am very
adept in a certain programming language and I have lots of experience on it, if
I were to do risk analysis of a project that is developed with the language I
know, I will put the risk factor of delay low. Even though I may not be doing
all the work, my personal bias is influencing me to put a low risk factor.
Another person who is less expert in that field may put a higher risk that the
project will cost more and will be delayed.
Similarly, an
experienced project manager will put a low risk factor for cost, delays and
resource availability as compared to a new project manager. This doesn’t mean
that the experienced manager is right. His over confidence can ruin the whole
project later. The point I want to make is that due to experience the risk
perception is different, and the risk management work will be different.
Cultural influence
cannot be avoided in risk management too. Some companies have a higher risk
appetite as compared to others. This too might have been influenced by past
experiences if they have gained much by taking risks.
All risks have
direct influence on the portfolio management plan. If we are conservative in
our approach, we will identify many risks. Each risk will have response plans
that will take vital time from the overall time. Furthermore, if the risks are
too many, the portfolio manager may even decide against starting a new project.
This may be the safe approach but the opportunity for loss will be too high.
Reference:
- Project Management Institute. 2018. The standard for portfolio Management – Fourth Edition. Page 90
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