Know Your Risk Tolerance First - Page 2

May 22, 2007

Patrick Gray

Failure points might be related to budgets or timelines, but should also be tied to the expected results and business benefit of the project. While an effort may be on-time and on-budget, elements of it may have been dropped or modified so drastically that the original business case is no longer relevant, possibly for the worse.

Rather than soldiering on with blinders firmly in place, having a readily available measuring stick might encourage less funding if a project is no longer meeting its original expectations, or readily justify increasing funding if the project has uncovered additional business value.

Minding the Store

Documenting risk tolerance and the failure points that it engenders is a noble effort, but not if the insights gleaned from the effort sit in a binder on a dusty shelf. Critical failure points and key benefits should be integrated into the tracking and management of the project, and at a minimum should feature prominently in stakeholder and management meetings related to the project.

Constantly comparing a project’s current state to its assumed benefits not only allows the company to monitor the risk of the project against documented risk tolerances, it also serves as an early-warning device should the project begin to veer off course.

Risk it all?

Risk to a project usually lurks behind its critical assumptions. If a project hinges on a speedy implementation, a critical risk is an extended timeline, and the assumptions that went into developing the quick timeline must be investigated. Can your company change quickly enough? Can the right resources be brought to bear? Is an IT project relying on business change that may not be supported by the organization at large? The more assumptions an implementation hinges on, the more areas of risk that must be investigated and monitored.

The IT press is littered with massive projects that started with the best intentions, only to end with a browbeaten CIO or CEO recounting how they never thought a critical assumption or assumptions would fail to hold water when the project hit its stride.

Before risking business continuity, critical processes or core operational elements of your company to an IT implementation, understand the risks inherent to each failure point, and each assumption. Awareness and continued vigilance are your two most effective weapons in the battle against risk, and assumptions that are not well-understood and constantly monitored are the gremlins that can derail a business.

Patrick Gray is the founder and president of the Prevoyance Group, located in Harrison, N.Y. Prevoyance Group focuses on providing project performance consulting, which combines project management and process improvement to ensure large IT projects deliver organizational value. Past clients include Gillette, Pitney Bowes, OfficeMax and several other Fortune 500 and 1000 companies.

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