Identify and mitigate project risk

What are possible risks?

Courtney Jordan
11 min readJan 2, 2023

There are a number of risks which can impact project success, including volatility, organizational and board pressure, company and market ecosystem, insufficient planning, planning fallacies, cognitive biases including anchoring and competitor neglect, as well an overarching optimism caused by taking an internal view and not bringing in consultants to provide an unbiased view , also called reference-class forecasting (Lavallo & Kahneman, 2003). When trying to forecast risky projects, executives often fall victim to the planning fallacy, in which they make decisions based on optimism, failing to consider the reality of the benefits, costs, and likely outcomes. Thus, teams are assigned initiatives that are unlikely to succeed.

Other factors that can contribute to the possibility of project failure are: uncertainty, inadequate and unknown requirements that lead to scope creep and frequent feature modifications (part of volatility), complexity, size and cost, poor execution, insufficient business transformation to support the project, improper stakeholder management (Alami, 2016).

Reasons projects fail

Projects tend to fail because the company ecosystem is not balanced and supportive of the project; this leads to projects being unbalanced and can’t be executed (Alami, 2016). Project ecosystems must be balanced and if disturbances are detected, they must be managed accordingly (Alami, 2016). Failure in project management practice include frequent changes to scope and overpromised expectations due to lack of project knowledge (Alami, 2016). During the course of a project lifecycle, key team members could leave the project or even the company (Alami, 2016), which causes the company to lose the benefit of their experience and knowledge.

In considering software projects, such as SaaS products, there are many ways that a company can miss the mark for a new product, including targeting the wrong audience, failing to provide a strong, convincing message for the target audience, not having enough users when the product or service is launched, ending up with customers who are not in your target audience, potential buyers and current users not perceiving the product’s value, cutting corners during the design and implementation process that lead to a less useful feature, providing a user experience that is sub-par or perceived to be more complex than that of competitors, not providing a way for users to trial the product or service before buying, a Go-To-Market (GTM) strategy that misses deadlines and delivers the product too late and not pricing the product appropriately considering the competitive market and audience expectations.

Reduce risk with proper scoping and breaking down into user stories

Project managers can reduce risk further by defining the scope of a project, then of particular features, down to the user stories that are considered in scope for that feature (Project Management Institute, 2021). They can create a definition of done via acceptance criteria and performance measures (Project Management Institute).

Track expected milestone dates

Project teams should track when they expect to achieve milestones against their expected completion date, and should avoid “done drift”, wherein the longer a project takes, the more its definition of done is likely to veer off course (Project Management Institute, 2021). This is also when scope creep will begin to set in, so project teams should establish a change control system to evaluate proposed changes and their expected value against the resource, time, and budget impacts, then present this to the sponsor and other key stakeholders.

Test rigorously to reduce rework

To reduce rework and waste, while increasing customer satisfaction and retention, it is important that the product be well-tested to limit the number of bugs that get released to the public (Project Management Institute, 2021). This includes establishing specifications for incoming work to be tested, as well as creating test plans and the quality assurance framework (Project Management Institute, 2021). It is important to have this testing framework and quality assessment criteria implemented up-front, to maximize the number of issues found during the continuous delivery process and to reduce rework, as well as team and stakeholder dissatisfaction (Project Management Institute, 2021). The later a bug is found, the more expensive it is (Project Management Institute, 2021), thus it is important to have a rigorous scoping and design with project manager, user experience experts, engineering and quality assurance involved so that the team can quickly identify technical constraints and potential performance issues that they will need to investigate during this time.

Identify effective metrics to communicate project status with stakeholders

Project teams will need to identify effective metrics that they can report to stakeholders, to communicate status and improve performance. This includes identifying Key Performance Indicators (KPIs) such as leading and lagging indicators (Project Management Institute, 2021). The former predict changes or trends to enable the team to identify root causes and reduce performance risks by identifying performance variances and establishing their performance threshold (Project Management Institute, 2021). These could include the number of items in the backlog, whether a good risk management process is in place, whether an effective stakeholder engagement and communication plan is implemented, and whether project success criteria has been adequately defined (Project Management Institute, 2021). Lagging indicators measure information after the fact, such as time or cost variances (Project Management Institute, 2021). These can be used to identify correlations with other undetected issues, such as team dissatisfaction (Project Management Institute, 2021).

To ensure that the project is being managed effectively, project managers must ensure that metrics are specific, meaningful/measurable (tied to the business goal, objective, or requirements), achievable, relevant (provide value and actionable information), and timely/time-bound, otherwise known as SMART criteria (Project Management Institute, 2021). The project or team manager (depending on who is accountable for the team’s deliverables, sometimes both) would then establish delivery metrics, including the number of items currently being worked on (work in progress), lead time before a story is added to the backlog or to the end of an iteration or release, where a lower lead time shows that the process and team are working more effectively, cycle time or the amount of time it takes the team to complete a task (shorter time indicate a more productive time and a consistent time helps predict future throughput rates), queue size, batch size (the estimated amount of work to be completed in a cycle, based on level of effort or storypoints, for example), process efficiency or the ratio between value-added time and value-added activities, where tasks that are waiting are not value-added time, but tasks in development are (Project Management Institute, 2021). The higher this ratio is, the more efficient the process, which reduces risk (Project Management Institute, 2021).

Although there are a myriad of other ways that the manager and team can measure the project, the most important things to be measured are those that the team can learn from, use to make a decision, improve the user experience or metrics strategy, avoid issues, and increase performance (Project Management Institute, 2021).

Ensure team understanding and reduce ambiguity

In the performance domain of uncertainty or risk, the project manager has to look at reducing uncertainty by improving team understanding and awareness of issues, events, and possible solutions (Project Management Institute, 2021). They need to reduce ambiguity, thus clarifying and elucidating areas that are not clear, such as the cause of events or which option to choose (Project Management Institute, 2021). They need to reduce complexity, including human and system behavior (Project Management Institute, 2021).

Control for volatility as much as possible

They need to control volatility, or rapid, unpredictable change, and they need to prepare for risk, including uncertain events or situations that could negatively impact the project (Project Management Institute, 2021). These could include economic factors such as inflation, pricing, and availability of resources, technical changes such as disruptive technologies, legal requirements, physical safety requirements, social and market influences, as well as political influences (Project Management Institute, 2021).

Combat uncertainty and reduce complexity

To combat the many areas of uncertainty, the manager and team need to gather information via research, expert evaluation and market analysis (Project Management Institute, 2021). They need to prepare for multiple outcomes and look at trade-offs across time, quality, risk, cost, and resource availability, as well as setting the project team up for success via learning, adapting and responding quickly (Project Management Institute, 2021).

To reduce the risk of complexity, the team could use microservices, which are decoupled from a larger system, enabling continuous iteration and delivery (CI/CD), they could get early feedback through prototypes and demos, and making sure that they are using balanced data (Project Management Institute, 2021). To combat ambiguity, they can iterate, do usability testing and gather customer feedback, then implement that feedback and continue to validate their direction.

To reduce the risk of volatility, the team can look at different ways to meet a goal, such as using different skills, resequencing work, and outsourcing work, such as to an agency (Project Management Institute, 2021). The project manager should also build in an expense buffer to accommodate delays (Project Management Institute, 2021).

Identify acceptable risk thresholds

To mitigate risk, the team needs to determine what level of risk is acceptable and define risk thresholds (Project Management Institute, 2021). The team also needs to be prepared to deal with threats, including knowing how to eliminate it or protect the project from it, when to escalate, such as if the project sponsor agrees that the threat is outside the scope of the project or needs a higher level of authority to weigh in, transferring ownership to a third party to manage the risk. If there is a threat, early action is better than trying to repair damage after the effect.

Create a response strategy

To increase opportunities, the team needs to have a response strategy to increase the likelihood that an opportunity, such as a cost reduction due to faster delivery, occurs. They need to know when to escalate, which third party or other team to share an opportunity with, and when to accept opportunities that do not have a proactive actionable plan to optimize them (Project Management Institute, 2021).

Communicate continuously to reduce risk

Frequent communication via daily stand-up meetings is another way that the team can identify threats and opportunities, the manager can remove blockers, and the team can share information on progress (Project Management Institute, 2021). By frequently demoing the incremental progress and performing continuous usability testing, the team can also identify threats and opportunities, such as negative or positive feedback, respectively (Project Management Institute, 2021). The team should also participate in weekly leads status meetings to identify any new risks or changes. Finally, the team should identify threats to performance in retrospectives to improve team cohesion and improve practices.

Promote a successful systems implementation

Temper optimism and identify bias
Although every company will have internal biases and various pressures, it is important to temper optimistic viewpoints and not to suppress pessimistic ones (Lavallo & Kahneman, 2003). Although teams and companies can rally to an optimistic vision, intrinsically motivating people to put more effort and energy into the project, it is important to get external consultation, or an “outside view” of the likely outcome of a proposed project (Lavallo & Kahneman, 2003). This reference-class forecasting looks at similar projects either in the company or in similar companies, laying them out on a distribution curve, then providing a prediction based on the perceived abilities of the team and company versus those of these other projects as to where the current project, team, and company are likely to fall (Lavallo & Kahneman, 2003). While traditional forecasting looks at the company’s capabilities, experiences, and expectations, the external view provides a reality check, reducing the chances that a company will blindly sink money and time into a project that is ill-fated from the start (Lavallo & Kahneman, 2003). The internal view is biased by attribution errors, wherein companies take credit when something goes well, but blame negative outcomes on external factors (Lavallo & Kahneman, 2003). Although it is not possible to foresee everything that could possibly go wrong with a project and how costs could balloon exponentially, it is important to take a realistic view of the possibilities in order to identify the likelihood of risks and ensure that mitigation plans are in place, building in more of a budget buffer than planning seems to indicate is necessary (Lavallo & Kahneman, 2003).

Understand your competitors as-is and to-be states

In addition to realistic project planning and suppressing too much optimism, it is important that companies understand what their competitors’ as-is state is, as well as what they expect their to-be state to become in the future. By not analyzing competitors, companies may not realize the risk that their competitors are targeting the same market (Lavallo & Kahneman, 2003) or adding similar differentiating features, which runs the risk of market saturation, reducing the perceived profitability of the endeavor.

Reduce complexity and ambiguity

To help projects succeed, companies can reduce complexity, breaking work down into phases, sprints, manageable user stories with acceptance criteria, and a definition of done. They can hire good project managers who are proficient in planning and executing complex projects successfully. Teams can make sure that they set stakeholder expectations, communicating delays as soon as possible to avoid conflicts and dissatisfaction. Project managers can set projects up for success by providing cost and time estimates that have a sufficient buffer to enable team members to meet all requirements for user stories. Keeping team members engaged and invested will help ensure project success, as the team will be less likely to lose members’ valuable experience and knowledge.

Other methods project managers can use to promote project success include carefully identifying, monitoring, and controlling risks, encouraging teams towards pessimism in determining likelihood of risks and ensuring that risk mitigation plans are in place (Lavallo & Kahneman, 2003).

Get an unbiased view

Companies should make sure not to rely on their biased internal view, but to consult an external expert that can provide an unbiased view and give the executives a dose of reality (Lavallo & Kahneman, 2003).

Identify critical milestones, task dependencies

By identifying critical milestones, project managers can measure whether a project is on track, and should be sure to celebrate wins both big and small with the team to increase engagement and motivation. To make sure that a project is progressing at the expected pace, project managers can identify task dependencies early so that multiple team members can work on related tasks simultaneously, such as designing and coding in tandem, reducing pivots and rework, which in turn increases team productivity and satisfaction. Project managers should make sure to engage their project sponsor by communicating early and often to set expectations and provide real-time status updates.

Keep team members engaged and energetic

Finally, it is important that team members be 100% dedicated to the project throughout its lifecycle, and project managers should ensure that the workload is steady but not overwhelming, to avoid disengagement and burnout.

References

Alami, A. (February 2016). Why do Information Technology projects fail? Procedia Computer Science Vol. 100. Retrieved November 3, 2022, from https://eds-p-ebscohost-com.ccco.idm.oclc.org/eds/detail/detail?vid=0&sid=c1ae826f-5d25-4139-bd9a-37458ab36c74%40redis&bdata=JnNpdGU9ZWRzLWxpdmUmc2NvcGU9c2l0ZQ%3d%3d#AN=118542021&db=edo

Gorbachenko, P. (2021, November 18). Functional vs Non-Functional Requirements [Updated 2021]. Enkonix. Retrieved November 9, 2022, from https://enkonix.com/blog/functional-requirements-vs-non-functional/

Lavallo, D. and Kahneman, D. (2003). Delusions of success: How optimism undermines executives’ decisions. Retrieved November 6, 2022 from https://hbr.org/2003/07/delusions-of-success-how-optimism-undermines-executives-decisions

Meick, A. (August 16, 2022). How to use a requirements gathering template. project-management.com: The ultimate reference for project managers. Retrieved November 6, 2022, from https://project-management.com/requirements-gathering-template-guide/

OCM Solution. (n.d.). Best stakeholder communication plan & strategy guide. Retrieved November 6, 2022, from https://www.ocmsolution.com/stakeholder-communication-plan/

Project Management Institute. (2021). A guide to the Project Management Body of Knowledge (PMBOK Guide) — Seventh edition — and The Standard for Project Management (ENGLISH). Project Management Institute. Retrieved November 9, 2022, from https://eds-p-ebscohost-com.ccco.idm.oclc.org/eds/ebookviewer/ebook/bmxlYmtfXzI5NDI0MjlfX0FO0?sid=288b33d9-cc3a-4f01-a74d-eb98312263a0@redis&vid=1&format=EK&rid=1

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Courtney Jordan

Storyteller, process optimizer, relationship builder, stakeholder uniter, experience creator. MS, HCI/AI/UX. Traveling this life w my soulmate and awesome teens