Shouldn't we De-Risk and Optimize first?

Everything comes with some form of risk. 

But why do we focus on managing risk before we have eliminated as much of it as we can? 

As most commonly demonstrated, the concept of risk management conveys an automatic acceptance of risks, an exercise performed to ensure we are identifying and managing our project risks, controlling them in some way. 

What of our Goals? 

Shouldn't our goal always be to deliver what our clients want with as little risk as possible? To deliver a high-value, efficient, and high-quality product?

Because the reality is, while clients may decide to accepts risks associated with initiating a project, they will most likely want it in its most valuable form and fashion, and with the least amount of potential liability. Even if this has not been explicitly stated. 

And while the process of risk management leads one to avoid risks when possible, or to transfer them to others, it seems that the process is either not initiated early enough, or that it is not integrated with planning in a way that would facilitate a more holistic de-risk and optimization sequence. 

The Typical Process

Often our projects move rapidly through initiation and planning, and a process flow is drafted for analysis and execution. The plan, component by component, is assessed for risks, to successful completion, to its successful operation, as one walks through its flow to achieve product delivery. 

Like the flow of a waterfall, we tend to look at the cascade of events, rather than step back and look at the whole picture. To rethink on a grander scheme and make better decisions.  

And in my opinion, this - simply addressing the fallout of plans earlier devised - is a mistake that needs remedy. 

An Example

Let's use an example of a manufacturing plant, which is typically designed to optimize productivity and the quality of its product. Sounds fair enough. The client wants its future operations to run smoothly, efficiently, and they'll want that product to come out according to spec's every time. Right?

But what if in that 'optimized' process, a bunch of unnecessary wastes are produced? Wastes that need to be managed, that incur a cost to manage, treat and/or dispose?  

What if, because of those wastes we need additional permits, monitoring, inspections, and reporting? And what if by allowing the generation of those wastes, there are additional risks of loss of containment of said waste streams? With the potential for future liabilities?

I'll stop there. You'll see where I'm headed soon...

A Job Done Well?

Let's assume that the project team has done a great job of recognizing all the waste streams to manage, and the risks associated. So they go ahead and include some system components to contain, treat, and dispose of those streams. 

They've ensured best practice for risk mitigation in containment, leak detection and dual protection. They've ensured safe and appropriate transport or transfer of the wastes, and they have assembled the appropriate specialists to manage the permitting and approvals required. 

But wait. Now there appear to be external stakeholders that don't like how big this development is getting. They weren't aware of the risks to the environment before, and don't want this waste stored here, or they don't like where you want to put it. Or how it will look after. It is too close to their homes, risking their health or their children's, no matter what your studies show.

So now a bunch more work needs to be done with external stakeholder management, and they are harder to work with, more difficult to find agreeable terms with, than the client. And so on - you see how every step becomes a reaction to another outfall?

All of these scope components represent outfalls of the main system to deliver the desired product. Some are obvious and can be mitigated as described above, some are not. 

These outfalls cost money, require infrastructure and personnel to manage, and each have associated risks and liabilities that someone will need to own and manage for the entire lifecycle of the plant's operation. And for some things, during post-closure of the facility, or otherwise introducing long term liabilities for the owner. 

In addition, these consequential management systems are often split off into separate projects, or at least, managed by siloed teams, to ensure appropriate expertise is applied for design and, to allow for expediency on delivery of the main project, which introduces a whole other lot of risks. 

All in all, for the client, the scope seemingly continues to grow, the timelines extend, and their costs increase. 

A Better Way?

Andy Jordan calls for use of risk management to ensure benefits realization. Alexei Sidorenko calls for its use to make better decisions, and an integrated approach to risk management. I agree with both authors. 

These approaches would involve what some might call risk-based thinking/planning, or perhaps lean-thinking. I just call it common sense, intuitive. 

Our senses are naturally attuned, after all, to avoid risks and seek out efficiencies - because it is safer, and because it takes less energy. Such is the case for everything. 

So what if, before we dive into a detailed planning exercise, and the greater task of full risk assessment, we started with a simpler skeleton of a plan. A light frame to look for trigger points that allow various alternatives to achieve the same means. 

Figure out all the associated components we might need to include within the scope of a project. And look for any sort of outfalls from various process steps, any interdependent systems. 

Play with various combinations of options, and look for opportunities to improve the system as a whole.  

• Can some of the outfalls be eliminated by making alternate choices?
• Could the process be streamlined?
• Can we avoid the production of wastes?
• Can we capture and recycle waste streams to our advantage, where we lower our own costs of operation, lower our demand on natural resources?
• Can we stabilize and convert waste streams into additional value streams that our client can sell?

Just how much risk can be eliminated by simply taking the time to develop various applicable scenarios, to inform and make better choices?

Larger mining companies refer to this process as the identify and select phases, and there are usually associated studies to both gather more information, as well as assess the trade offs to inform better decisions. 

I'm not saying it's all done well, or that all risks and outfalls are considered appropriately, but it is a great process that all projects should incorporate. 

Taking such an approach to de-risk and optimize takes some forethought. It requires a staged-gate, iterative, and agile form of planning. And it needs to be done at the very start, a pre-detailed planning exercise.  

At least if one wants to avoid rework and its associated impacts.

If you were the project lead, what would be your preference?

Originally published on projectmanagement.com

Photo credit: Ashley MacKinnon via Visualhunt.com / CC BY