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Project Management

Notes 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.
Mathematical formulas that predict a single rate of return or “best estimate” are not enough. The
author’s approach emphasizes the nature and processing of the data used and specific combinations
of variables like cash flow, return on investment, and risk to estimate the odds for each potential
outcome. Managers can examine the added information provided in this way to rate more
accurately the chances of substantial gain in their ventures. The article, originally presented in
1964, continues to interest HBR readers. In a retrospective commentary, the author discusses the
now routine use of risk analysis in business and government, emphasizing that the method
can—and should—be used in any decision-requiring situations in our uncertain world.

Of all the decisions that business executives must make, none is more challenging—and none
has received more attention—than choosing among alternative capital investment opportunities.
What makes this kind of decision so demanding, of course, is not the problem of projecting
return on investment under any given set of assumptions. The difficulty is in the assumptions
and in their impact. Each assumption involves its own degree—often a high degree—of
uncertainty; and, taken together, these combined uncertainties can multiply into a total

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