Managing Project Risk

White Paper www.butlergroup.com
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X Analysis without compromise 1White Paper www.butlergroup.com
Written by: Mark Blowers
Published July 2006 All rights reserved. This publication, or any part of it, may not be reproduced or adapted, © Butler Direct Limited by any method whatsoever, without prior written Butler Direct Limited consent.
X SUMMARY
The reality is that too many projects are significantly delayed due to insufficient focus being put on the risks involved, with consequent losses to business or escalating costs. Project success is elusive. It is clear that making the right choices concerning the essential trio of people, time, and budgets, will yield competitive benefits and help control risk. There are a number of initiatives taking place that aim to make IT management less of a black art, and make IT more transparent to business executives. It is only through better visibility and availability of information that IT operation can improve transparency and the risks are more widely understood. One of the vendors at the forefront of this approach is CA. Project Portfolio Management (PPM) combined with risk management within an IT governance framework allows project resources to be marshalled optimally, the risks fully understood, and lessons learnt in post-deployment to be fed back to development. Throughout project management the emphasis is now on delivering business value.
"Throughout project management the emphasis is now on delivering business value."
CA Clarity provides the functionality to monitor the key risks to projects, especially for those professionals whose time is spent working on projects or activities where the time is either charged to a third party, or needs to be tracked and recorded in order to monitor progress on projects. Visibility and accountability are the key issues. Inherent within the design of CA Clarity is the ability to mitigate project risks, and provide visibility to staff at all levels within an organisation. Integrating the functionality requirements of portfolio, project, and risk management is going to be extremely important to the success of projects, especially now that value must be delivered and balanced with risk. For most organisations the problem is not so much a shortage of information but a tendency to suffer from information overload. The most important issue, and the one which CA Clarity addresses, is data relevancy, ensuring that the correct information is recorded, stored, and made available to authorised users.
X THE IMPACT OF RISK ON THE PROJECT PORTFOLIO
A particular strategy or course of action for an individual project may appear to make excellent sense, both financially and operationally, but could expose the business to unconsidered risk. The suggestion is not that organisations need to become risk-averse, after all a risky strategy with potentially large paybacks may be exactly what the business is aiming for, but the magnitude of the risk(s) on the project portfolio needs to be quantified to as great an extent as is possible. Market and credit risk are relatively well accepted elements of risk management. This is no doubt aided by the fact that the data that underpins the associated risk dimensions is fairly readily available. Each organisation will then undertake its own analysis on the data sets, for example, in the form of developing advanced forecasting models, simulations, and risk profiles. Operational risk is softer. For example, how many organisations are able to comprehend the impact of specialist resource being unavailable, or the risks associated with a project failing? Operational risk is more concerned with the day-to-day execution of tasks within the IT department and the implications of something going awry, incorporating people, time, and budget risks. By leaving risk indicators out of PPM, many organisations will easily be led down paths that look good from the view of an individual project, yet could lead to unforeseen outcomes. In this respect, risk management can be seen as yet another important criterion, used to further safeguard or justify important decisions.
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