Complexity and systemic risk from the project manager's perspective

Outline

This self-reflection article sheds light on my understanding of two key concepts - complexity, and systemic risk from the project management perspective.

The unprecedented rate of technological advancements in the form of the internet of things, cloud computing, artificial intelligence, data science and robotics has equally revolutionised our private life and social world. The application of these technologies reverberates in natural, social, and biological sciences and more importantly business management. As a result of all this, humankind is experiencing the fourth industrial revolution (industry 4.0).

There is no doubt that the complexity and unpredictability are the hallmarks of the 21st-century and have increased manifold as a result of this industrial phenomenon. It further informs the subject matter of business management discipline underpinning complexity and systemic risk.

Failing to grasp the complexity and systemic risk at the earliest can pose a negative impact on resources including people. KPMG’s Project Management Outlook 2019 underscores this fact very openly. The survey further calls for project managers to respond to uncertainty and handle complexity in projects for strategic benefits of the business (Sexton, Foley & Wagner 2019, p. 1).

This article addresses this understanding by elaborating on the two concepts with specific examples. The second section is about how I want to utilise these concepts in the professional world of project management - both as a practitioner and as an academic. Finally, it provides key takeaways that I have learned and would like to keep as tools in my evolving project management toolbox.

The concluding remarks provide a short future scope on the entire gamut of the concepts from the 21st-century context.

Complexity in Project Management?

There is a wide body of knowledge on the complexity studies, epistemological debates, and regarding its definitional framework. The application of complexity studies is extensive and has been traversing through new knowledge areas in modern times. In the case of project management, complexity is itself a differentiating factor that distinguishes a simple, complicated and chaotic system or project from a complex one.

This section focuses primarily on projects and systems that are complex. The questions are: what makes a project complex? What are the origins of complexity in a project? What are the characteristics of complexity that a project manager needs to worry about? What are the drivers of complexity in project management? The following paragraphs address these research questions with relevant examples.

There are endogenous and exogenous sources of project complexity found in every complex project or complex adaptive system. Baccarini (1996, p. 203) proposes an idea that complexity in a project stems from various interrelated parts that are elements, subsystems, or systems. These parts further operationalised by differentiation (heterogeneity of these parts) and their interactions in the form of interdependency. This is further governed by integration through coordination, control and communication. Baccarini’s postulation covers the aspects which are endogenous in a project. This is one of the reasons why some projects are complex.

The second reason is the heterogeneous nature of the parts due to which a complex project displays unique characteristics such as emergence, autonomy, connectivity, diversity, and belonging (Gorod et al 2008, p. 21). The third reason is exogenous sources influencing a complex project. As a complex project is artificially engineered, its interacting parts are placed within the system boundary. This boundary interacts with its external influencing factors while simultaneously letting the parts to interact within. Any complex project or a System of Systems (SoS) containing a constellation of systems is governed by a governing body. This body receives feedback from the system or a SoS to maintain the efficiency and effectiveness of the system entity.

A project manager faces complexity in every natural and human-made complex project or system in their entire lifecycle. Project complexity engulfs triple constraints in project management - cost, scope and time, plus value and quality. Additionally, according to Cristóbal et al (2018, p. 3), the drivers or constraints affecting complexity are ‘size, interrelations and interdependence, goals and objectives, stakeholders, management practices, division of labour, technology, concurrent engineering, globalisation and context-dependence, flux, diversity and ambiguity’. A key takeaway is to acknowledge the fact that complexity in complex projects is not always detrimental rather a desirable phenomenon due to its positive influence for the better functioning of the entire project (Vidal & Marle 2008, p. 1096; Cristóbal et al 2018, p.2).

For example, Amazon’s same-day delivery service involves a fleet of delivery vans and trained drivers, automated warehouses, robotised pick and pack systems, supply chain management, navigating through traffic and sometimes using drones to deliver the goods and products. At every stage, it involves the interaction of these constituting elements and human involvement. This further makes the service profitable for Amazon (the governing body) through greater customer satisfaction streamlining the positive influence of complexity.

The observation I would like to make here is that I think the theoretical debate needs to be raised from complexity in projects to multiplexity (multiple complexities) in complex projects. Instead of assuming that complexity as a singular phenomenon, I think the multiplicity of complexity is present in the project/system/SoS that has given rise to a multiplex project/system. Instead of challenging the concept of complexity present within a complex project/system, I think there is room to acknowledge the concept but at the same time, there is also a need to acknowledge the presence of a multiplicity/variety of complexity present in the project/system making it a multiplex project/system in its entirety.

Taking the clue from this discussion the next section sheds light on the concept of systemic risk.

Why should project managers be heedful of systemic risk?

Systemic risk is conceived as a substantial risk in the complex project management where one event triggered by a perturbation in one participant part has the potential to translate to the others in a non-linear fashion. The systemic risk is always regarded as an elephant in the room because although its presence is acknowledged at the very outset of the project initiation, one cannot give a guarantee that it will be mitigated or would not occur in the later stages of project’s life cycle. The work of Lagi, Bertrand & Bar-Yam (2011, p 1-15) is a classic example of how food prices in the Middle East and North Africa region as the first perturbation event gave rise to Arab Spring in December 2010. This cascaded into the fall of many erstwhile governments and authoritarian regimes in the region.?Nuclear accidents, pandemic situations, economic crises are all examples of systemic risk events that can devastate several SoS at a time, or could an existential threat to humankind.

It should be noted that systemic risk always has a negative connotation and an undesirable event but it can offer an opportunity to some. For example, the US benefited largely from the devastated European countries by supplying essential goods and services after the first and second world wars. Nonetheless, it is advised that project managers shall take systemic risk into account due to the rapid pace of globalisation and a new world order emerging post-COVID 19 pandemic. The interdependencies of systems in the current context are the result of centuries of work and moving away from this is almost impossible.?

The concept of holarchical approach is worth mentioning here. The complex systems as we have earlier seen are desirable for getting extraordinary outcomes and fulfil the strategic and operational objectives. This is very true in the case of SoS such as national security apparatus which strives to achieve the goal of keeping a country safe and secure. Such systems are working in between the realms of chaos and order (chaordic). This spectrum originates from the static and dynamic nature of the SoS. However, the systemic risk can bring any SoS at the verge of chaos and constantly needs a project manager/governing body to pay special attention.

Similarly, any complex project/system/SoS in the context of project management irrespective of triple constraints reciprocates between the chaordic spectrum and therefore, the effectiveness and efficiency very much rests on how systemic risk is understood, responded, and mitigated before any perturbation occurs.

Conclusion

Project management professionals need a holarchical view for finding out the presence and extent of risk systemicity while undertaking complex projects.

References

Baccarini, D 1996, ‘The concept of project complexity—a review’, International Journal of Project Management, vol.14, no. 4, pp.201-204

Vidal, LA & Marle, F 2008, ‘Understanding project complexity: implications on project management’, Kybernetes, vol.37, no.8, pp.1094-1110

Cristóbal, JRS, Carral, L, Diaz, E, Fraguela, JA & Iglesias, G 2018, ‘Complexity and Project Management: A General Overview’, Complexity, vol.2018, special issue, pp. 1-10

Bakhshi, J, Ireland, V & Gorod, A 2016, ‘Clarifying the project complexity construct: Past, present and future’, International Journal of Project Management, vol.34, no. 7, pp.1199-1213

Gorod, A, Gandhi, J, Sauser, B & Boardman, J 2008, ‘Flexibility of System of Systems’, Global Journal of Flexible Systems Management, vol. 9, no. 4, pp. 21-31

Sexton, P, Foley, E & Wagner, R 2019, The Future of Project Management: Global Outlook, KPMG, AIPM and IPMA Project Management Survey, viewed <https://assets.kpmg/content/dam/kpmg/au/pdf/2019/future-of-project-management-global-outlook-2019-report.pdf>.

Lagi, M, Bertrand, KZ & Bar-Yam, Y 2011, ‘The Food Crises and Political Instability in North Africa and the Middle East’, New England Complex Systems Institute, no vol, no issue, pp. 1-15.

Gorod, A, Sauser, B & Boardman, J 2008, ‘Paradox: Holarchical view of system of systems engineering management’, paper presented at IEEE International Conference on System of Systems Engineering, June.?