Page 81 - DMGT302_FUNDAMENTALS_OF_PROJECT_MANAGEMENT

Fundamentals of Project Management

Notes Strategies for Controlling Risk

PMs must control the threats and uncertainties that could potentially adversely affect their
projects. There are a number of strategies for doing this. They include:
1. Prevention: reduce the number of uncertainties and/or threats.

2. Transference: make some other party responsible for the uncertainties or threats.
3. Mitigation: lessen the impact of the uncertainties or threats should they occur.
4. Contingency planning: plan in advance for coping with uncertainties or threats should
they happen.
5. Assumption: identify the uncertainties or threats and accept their potential impact on the
project because the cost of prevention, mitigation, transference, and contingency planning
are greater than their possible impact.
These strategies are implemented through a variety of risk management procedures. The obvious
ones include:

1. Accept only project types with which the firm has a proven and positive track record.
2. Work only for past clients where the relationship was successful and avoid working with
new clients.

3. Use the same design team(s) on all projects because the team has proven it can work
together successfully.
These strategies, however, can lead to a stilted practice that becomes so risk-free that it becomes
bland, uninteresting, and unchallenging. Most design firms and design professionals want or
need challenges. Challenging projects stretch the portfolio of design firms, design professionals,
and PMs. Many design firms actively seek out projects that present greater and more rewarding
challenges. Many design professionals and PMs seek out design firms with just that attitude. Of
course, new, interesting, and challenging projects present risks. Risks directly associated with
the design itself can only be alleviated by good design. The PM and design team should produce
the very best design possible to meet the client’s and project’s needs. But there are other risks
design professionals face as well. Surprisingly, many of them are related to the agreement
between the owner and the design professional. Design is a challenging and risky enough
endeavor as it is without being compounded by natty contractual risks. Fortunately, these can
be controlled by employing a few basic risk management strategies, such as:
1. Use standardized contract forms whenever possible.

2. Understand the provisions of the contract.
3. Avoid contract language that increases risk.
4. Avoid unacceptable risks.
5. Use fee types appropriate for services provided.
6. Provide more comprehensive services.

7. Identify excluded as well as included services.
8. Specify how disputes will be resolved.
How can business executives make the best investment decisions? Is there a method of risk
analysis to help managers make wise acquisitions, launch new products, modernize the plant,
or avoid overcapacity? “Risk Analysis in Capital Investment” takes a look at questions such as
these and says “yes”—by measuring the multitude of risks involved in each situation.

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