In this, the final installment of the Modeling Risk series, we going to put together everything we covered in the previous installments into a unified risk model.
In part one we learned about Client Risk: risk that clients bring when they walk through the door. Based on attributes such as the ability to make decisions, relative insensitivity to price and technology agnosticism, clients can either be part of the problem or part of the solution when it comes to managing risk.
In part two we learned about Structural Risk: risk that is derived from how the team is structured – whether they are familiar with each other, a common process, the tech or the client. In some ways this type of risk is learning curve risk, because it models how many learning curves are piled onto the project.
Finally, in part three we learned about Qualitative Risk: risk that is driven from the quality of the team, the technology and the support for the team. The better these things are, the more curve balls they can handle, and the more they can cope with risk from the other vectors.
From each of these three aspects of risk we derived an overall letter grade: from A to F.
Putting it All Together
Here’s how the letter grades combine:
Low Risk: All A’s and B’s
This is a good to great project with minimal risk. In this range you can count on projects staying on track, and arriving where they are supposed to within budget, on schedule and at a level of quality that will satisfy everyone.
Medium Risk: One or Two C’s
This is a project that has a combination of a relatively problematic client, an immature team, or mediocre quality issues. It is possible to succeed in this space, but it requires a close watch and quick action to mitigate the problems that inevitably will come up. The success of the project depends on at least on of the three areas being better than the “C” level – the strength that can hold up the project.
High Risk: Three C’s or One or Two D’s
This is a project that, from its onset, has a good chance of going bad. Either there is no strong area that pulls the project up to the medium risk level, or there is one or more areas with real problems: a truly high risk client, an immature team or poor quality from the team, the technology or the team’s support system.
Despite the best risk-mitigating activity from management, there is still a good chance that this project will go wrong. It would be a sound decision to walk away from such a project, but if taking it on is necessary, then it should be approached extremely defensively, as there will inevitably be serious crises as the project progresses.
Lead Balloon: One or more F’s, or 3 D’s
This is either a project with an impossible client, a disastrous team, or a catastrophic quality issue; or it is a project that is merely poor in all three areas.
Generally speaking, it is not possible to be successful with such a project. The presence of the F will sink the project on its own, or the general malaise of the 3 D’s will accumulate into a disaster.
A project at this level needs a fundamental reset: generally either the client or the team has to go, depending on the source of the problems. Risk mitigation at this level will be overwhelmed.
So there you go – my general theory of project risk. I hope that you find it helpful, and through it gain a greater understanding of why projects succeed and fail, and when to plunge ahead, and when to run the other way. Good luck!