Risky Business

1. Risky Business How to Manage Risk When the Customer Doesn’t Want to

2. Two Basic approaches Hope Intentionality www.SteveNortonPMP.com

3. Role Play • The Project Manager • The client/customer – reluctant to “waste” money, time, and effort on Risk Management www.SteveNortonPMP.com

4. Consider the risks • 2001 - 2008 • 34,000+ motorcyclists killed • 1.2 million treated at Emergency Rooms • 2010 • 4,502 motorcyclists killed • Highest rates were among 20 – 24 year olds followed by 25 – 29 year olds www.SteveNortonPMP.com

5. Consider the risks • Estimated annual costs saved from helmet use (medical, productivity) almost $400M in California • Motorcycle crash related injury and death totaled $12 Billion in 1 year in medical care costs and productivity losses www.SteveNortonPMP.com

6. Consider the risks • Helmets estimated to prevent 37% of crash deaths of motorcycle riders and 41% of crash deaths of passengers www.SteveNortonPMP.com

7. Consider the risks • Everything we do has risks • Everything has potential payoffs • We decide what is “worth it” • Flight to Helena • Risk of delay, crash, lost luggage • Payoff in time and convenience www.SteveNortonPMP.com

8. Payoff for riding motorcycle? • Reduced fuel costs • Easier parking • Fun • Closer to nature • Feels good • Looks good www.SteveNortonPMP.com

9. Risks of riding motorcycle? • Crashes (2% of vehicles on road but motorcycles make up 10% of crashes) • Injury (8 times more likely to be injured in a crash than in a car) • Death (35 per 100M miles versus 1.7 in car) • 37% of motorcycle fatalities involve speeding compared to 23% for cars www.SteveNortonPMP.com

10. Managing Risk • Situation • Your 20 year old is planning to attend college out of state • Also planning to get/ride a motorcycle www.SteveNortonPMP.com

11. Managing Risk • What could you do to manage risk? • Talk them out of riding motorcycle • Buy them nice safe car • Educate them • Buy them helmet and other PPE • Send them to a state with helmet laws • Buy insurance (comp, liability, medical) www.SteveNortonPMP.com

12. Managing Risk terminology • What could you do to manage risk? • (A) Talk them out of riding motorcycle • (A) Buy them nice safe car • (M) Educate them • (M) Buy them helmet and other PPE • (M) Send them to a state with helmet laws • (T) Buy insurance (comp, liability, medical) www.SteveNortonPMP.com

13. Cost of Managing Risk? • What were the costs for risk management related to your 20 year old’s life? • Price of a safe car • Cost of helmet and other PPE • Higher tuition rates • Insurance premiums • Time invested evaluating/purchasing • Was it worth it? www.SteveNortonPMP.com

14. Cost of Managing Risk? • Risk Management Planning is like buying insurance; you don’t want to have to use it, but if you need it you’re glad you did • Recognizes uncertainty and provides forecasts of possible outcomes www.SteveNortonPMP.com

15. RM like wearing a helmet • There are 3 ways to look at it: • If I crash, I’ll be glad I spent the time and money • If I don’t crash, I could view it as wasted time and money and an inconvenience • Or, I could view it as time and money well spent because even though I may not have needed it this time, I might next time… www.SteveNortonPMP.com

16. Risk management • Everything we do involves risk of some kind • No company can make a profit or achieve its objectives without taking risks • “The person who risks nothing, does nothing, • has nothing, and is nothing.” • Janet Rand www.SteveNortonPMP.com

17. Risk management • Given that we will take risks, the only questions are: • Will we stick our heads in the sand and hope for the best? • Or • Will we intentionally manage them and cause the best outcome possible? www.SteveNortonPMP.com

18. Managing Risk The same payoffs and risks exist regardless of the approach we take. Shall we influence the outcome or just wait and see what happens? Do we want to manage them or let them manage us? www.SteveNortonPMP.com

19. Benefits • Benefits of planning for risk events: • Produces better business results through more informed decision making • Improves cost and schedule estimating • Contributes to project success • Positive influence on creative thinking, innovation, and team building • Helps senior management understand what’s happening with the project and challenges it faces www.SteveNortonPMP.com

20. recommendation • Look at the various risk types including: • Financial, product, intellectual property, liability, quality, customers, employees, personal injury, etc. • Consider possible risk responses including: • Avoid, mitigate, transfer, and accept (active or passive) • Consider the possible opportunities to exploit • Document the decisions and review them at agreed upon frequencies www.SteveNortonPMP.com

21. End of role play • Unpacking the Role Play • What worked well for me was… • What would have worked better for me was… www.SteveNortonPMP.com

22. Reframe the options From: Whether or not to perform risk management activities (yes/no) To: Since we are taking risks, how shall we manage them and how much effort shall we expend? (what/how much) www.SteveNortonPMP.com

23. Making sure risk addressed Take these five steps to ensure risk is addressed: Begin with mindset that you will address risks, it’s just a matter of how much effort is expended Educate customer/client on the continuum of RM planning (reframe – what/how much) Be prepared with 2 short personal examples (1 bad outcome, 1 good outcome) of RM planning Show how easy and pain free managing risk can be Show the potential benefits (of project specific RMP) on ongoing operations www.SteveNortonPMP.com

24. #1 Beginning with right mindset E + R = O Event + Response = Outcome If you don’t like the outcome you can: Complain about or blame the Event OR Change your Response to the Event www.SteveNortonPMP.com

25. #1 Beginning with right mindset (cont.) • Start with the right mental attitude • Knowing you can cash a check (good) • Knowing insurance won’t cover the damage (not so good) www.SteveNortonPMP.com

26. #2 educate and reframe • Due Diligence • The care that a reasonable person exercises to avoid harm to other persons or their property • Research and analysis of a company or organization done in preparation for a business transaction (as a corporate merger or purchase of securities) www.SteveNortonPMP.com

27. #2 educate and reframe (cont.) • We will be taking risks, what steps and how much effort shall we expend? A Little A Lot Little: Cross the street Lot: Start up a nuclear facility www.SteveNortonPMP.com

28. #2 educate and reframe (cont.) • Cross the street – minimal effort done in head • Risks include • Busy – odds of being hit • Police – odds of being caught • Setting bad example – odds of somebody seeing me • Payoffs include • Avoid 30 yard walk to corner and back • Avoid waiting for the light www.SteveNortonPMP.com

29. #2 educate and reframe (cont.) • Start up nuclear facility – significant effort that may include: • Facilitated meetings, development of Risk Register, qualitative and quantitative analyses, risk response planning, monitor and control risk • Engineered barriers, passive safety systems, active safety systems, administrative controls, minimum staffing levels, response times, preventive maintenance programs, safety class and safety significant systems, items important to safety classifications, etc. Note: In 2010 70,000 pedestrians injured and 4,280 were killed www.SteveNortonPMP.com

30. #3 two short personal stories • One example of poor risk management planning outcome • Modified Core Sample System (MCSS) project ($3M one year project) • Initial high level RMP as part of $325M risk assessment • Only revisited once in 3 years • Significant changes in execution and acquisition strategies made during project without evaluating risks and opportunities • Completed at $11M+ and 3 years www.SteveNortonPMP.com

31. #3 two short personal stories • One example of adequate risk management planning outcome • Slightly Irradiated Fuel Interim Storage Project ($25M 18 month fast track project) • Two 3-hour initial facilitated risk and opportunities meetings with project team and stakeholders • Approximately 30 risks and opportunities identified, quantified, addressed and tracked (quarterly) • Many risks were realized and planned responses taken • Completed on budget and schedule, won local Project of the Year Award Note: Approximately $65K/workday average project burn rate www.SteveNortonPMP.com

32. Personal Story Outline Title and size of project Summary of scope What RMP was done for the project? How did that affect the project outcome? What message should be taken from this? www.SteveNortonPMP.com

33. #4 managing risk doesn’t need to be hard Be prepared to use a graded approach e.g. tailored to the project Low end could start with key team members and stakeholders for one – two hours High end should employ professional analysts and computer simulations Crawford Slip Method (CSM) simple but useful tool to identify risks www.SteveNortonPMP.com

34. Crawford Slip Method • Explain the process (see handout) • Define the terms • Lay the ground rules • Pass out supplies • Ask the question (10 times at 1 minute intervals) Q: “What risk is associated with…?” A: “X may happen and will result in Y” www.SteveNortonPMP.com

35. Crawford Slip Method • Evaluate answers Probability (H/M/L – likely, occasionally, not likely) Impact (H/M/L – 50% +/-, 20-50% +/-, <20% +/-) • Arrange responses in like groups • Name the categories • Identify next steps for building risk register and risk response planning www.SteveNortonPMP.com

36. #5 Potential benefits to ongoing operations Some unused risk mitigation (e.g. spare parts or backup systems) can be moved into operations Evaluating project risks sometimes uncovers systemic organizational problems Going through the process helps those involved to see risks and opportunities in other areas Process can enhance team building www.SteveNortonPMP.com

37. Summary Take these five steps to ensure risk is addressed: Begin with mindset that you will address risks, it’s just a matter of how much effort is expended Educate customer/client on the continuum of RM planning (reframe – what/how much) Be prepared with 2 short personal examples (1 bad outcome, 1 good outcome) of RM planning Show how easy and pain free managing risk can be Show the potential benefits (of project specific RMP) on ongoing operations www.SteveNortonPMP.com

38. Summary 38 Additional steps that can be taken to make sure risk is addressed when the client and/or stakeholders don’t want to invest in it include… www.SteveNortonPMP.com

39. Contact Information Steve Norton, PMP, MSPM 509-430-1690 Steve@SteveNortonPMP.com www.SteveNortonPMP.com