Program managers must lead in an environment of uncertainty. Risk management processes provide structure to handle this uncertainty. The uncertainty by itself is challenging enough, but if it is not handled with consistent methods, it escalates. Therefore, the program manager needs to create a proactive and positive culture when it comes to risk management.
This 6 part Guide to Program Risk Management will help you identify risks and walk you through the process to assess impact and involve stakeholders.
Part 1 of 6: The Program Manager’s Risk Environment
Part 2 of 6: Risk Statements
Part 3 of 6: Likelihood Scales
Part 4 of 6: Establishing Adequate Reserve
Part 5 of 6: Risk Attitudes
Part 6 of 6: Be Success Oriented
Part 3 of 6: Likelihood Scales
The likelihood scale shown in Table 9-2 addresses the probability of the risk actually occurring, and assessing probability can be accomplished by very sophisticated means or very rudimentary or simplified methods. Sophistication doesn’t always equate to accuracy. When you are using qualitative, you are accepting a higher level of inaccuracy. What allows you to accept this inaccuracy? The fact and acknowledgment that the likelihood is inaccurate. This acknowledgment means that in general when we see risks with high impacts, we treat them with respect and give them priority, knowing the potential error in our likelihood assessment.
If you accept the fact that probabilities for qualitative risk assessment are inaccurate and use judgment to compensate for those inaccuracies, the natural question is: How do you create these inaccurate probabilities? The easiest way is to simply ask what the likelihood is. Some can answer this readily; others are helped by bounding the probabilities with questions.
To create probabilities by bounding with questions, you ask questions that create smaller and smaller probabilistic windows for the likelihood. As with any estimating activity, the accuracy of this method is dependent on the knowledge of the person answering the question. The ﬁrst question to ask with regard to bounding probabilities should be: Is the likelihood of this risk occurring greater than 50 percent or less than 50 percent? Most knowledgeable people can answer this question with conﬁdence, and when they do, it puts them in a window of either zero to 50 percent or 50 to 100 percent.
Now your job is to get another level of accuracy by splitting the next window. Suppose they ended up stating that the likelihood was between zero and 50 percent. You would then ask the question: Do you think the likelihood is between zero and 25 percent or between 25 and 50 percent? Again, most knowledgeable people can answer this question. If this or the ﬁrst question cannot be answered, further research is required because uncertainty at this level is a risk in itself and needs to be understood. If they answer that the probability is between 25 percent and 50 percent, you have them in another window and will seek another level of accuracy. The next question should be: Do you think the likelihood is between 37.5 percent and 50 percent or between 25 percent and 37.5 percent? Some people will be comfortable in answering this question, but most will not. You could go further in the quest for more accuracy, but in the absence of real data, the answer to further questions is highly questionable. The good news is that when you can answer the ﬁrst two questions, there is a foundation for performing good, consistent, and qualitative risk analysis. If the likelihood is high, it can also be valuable to ask if it is greater than 95 percent. Conversely, if the likelihood is low, it’s valuable to ask if it is less than 5 percent.
Once your team has decided on their plan and process, PPM software can help you execute that process. WorkOtter helps you successfully execute your program process strategy for project success. Get a demo of WorkOtter and see how we can make your program management effective.
“The Handbook of Program Management: How to Facilitate Project Success with Optimal Program Management, Second Edition” by James T. Brown is a copyrighted work of McGraw-Hill and McGraw-Hill reserves all rights in and to the Content. ©2014 by McGraw-Hill Education. Purchase the book on Amazon.