Guest Post by John Ayers (first posted on CERM ® RISK INSIGHTS – reposted here with permission)
Risk management involves the identification of risks, prioritization of the risks based on probability of occurrence and impact of occurrence, and mitigation plans to control the risks. Once identified and prioritized the question then becomes which risks should be incorporated into the schedule and which ones should be included in the risk register?
The general rule of thumb I have used requires risks with a 50% or greater probability of occurrence to be incorporated into the schedule. The other risks are entered into the risk register.
How to Incorporate a Risk into the Baseline Schedule
The first step is to create a Work Package (WP) for the risk which will include a dictionary defining: scope; budget; schedule; input to start task; output to close task and earn value technique. The activities that are required to be completed to accomplish the task are identified and time phased. These activities constitute the risk mitigation plan. The WP activities are then added to the baseline schedule and linked to other task activities accordingly. A budget is approved for the WP and allocated to the activities. As a result of these steps, the risk and mitigation plan is included in the baseline schedule and program budget.
Example of Incorporating a Risk into the Schedule
I was project manager for a foreign military sale (FMS) launcher contract awarded to a Greek subcontractor. It was a build to print contract which can be very risky depending on the quality and completeness of your Technical Data Package (TDP). We were not familiar with the TDP provided to use by the government agency. As a result we identified a risk greater than 50% for the ability of the subcontractor to build the product on time, on schedule and spec compliant. The mitigation plan for this risk was to provide additional on-site engineering and quality personnel during the upfront manufacturing phase through the first article product to ensure questions and issues that may be raised could be addressed and solved in real time. A WP was generated with activities, budget was approved, and the task was incorporated into the baseline schedule. As it turned out, the additional on-site personnel were required and the subcontractor delivered the first article unit on time, within budget and spec compliant.
If the probability of occurrence of the risk is high (50% or greater), then incorporate the risk mitigation plan into the baseline schedule and budget. As evidence in the example above, if the subject risk was incorporated into the risk register then it would have been too late to provide the extra engineering and quality support required in a timely fashion resulting in a significant impact to the program.
John earned a BS in Mechanical Engineering and MS in Engineering Management from Northeastern University. He has a total of 44 years’ experience, 30 years with DOD Companies. He is a member of PMI (project Management Institute). John has managed numerous firm fixed price and cost plus large high technical development programs worth in excessive of $100M. He has extensive subcontract management experience domestically and foreign. John has held a number of positions over his career including: Director of Programs; Director of Operations; Program Manager; Project Engineer; Engineering Manager; and Design Engineer. His technical design areas of experience include: radar; mobile tactical communication systems; cryogenics; electronic packaging; material handling; antennas; x-ray technology; underwater vehicles; welding; structural analysis; and thermal analysis. He has experience in the following areas: design; manufacturing; test; integration; selloff; subcontract management; contracts; risk and opportunity management; and quality control. John is a certified six sigma specialist, certified level 2 EVM (earned value management) specialist; certified CAM (cost control manager).