Managing Schdeule Risk

Cost and schedule risk management must be addressed for any project to succeed. Without margin, the project schedule and cost estimates will be late and over budget before starting.

Here are some clips from a recent week-long training session on a defense program for getting the Control Account Managers up to speed on what Program Controls do while developing the Performance Measurement Baseline (PMB).

Let's start with the fundamental principle of programmatic risk management. We must clearly understand the risks and how to deal with them. This means seeking out all possible risk, from the Known obvious ones (which are likely to be issues instead of risks) to the Unknown risks. Only if the risk is Unknown do we stop searching for possible risks on mission-critical projects. If you say there are unknown unknowns, the project should have a fail-safe mode. This is usually "handled" by a cancellation and a project restart.

There are many kinds of programmatic risk, as well as all the technical risks. Seeking and managing technical risks is for another time, but here is a start on programmatic risks.

When we place these programmatic risks in the Integrated Master Schedule (IMS), they look like this: This example looks at duration risk. Remember, any single point is wrong without a statement of the variance. (Hence, the single-point estimate.) Developing the upper and lower limits of the defined probability distribution is another topic. For now, let's assume we have all three pieces of information.

When we run the Monte Carlo simulator, we get outputs like this: The Probability Distribution Function (PDF) of the possible task durations generated by the Monte Carlo tool. The Cumulative Distribution Function (CDF) shows the probability of completing a task "on or before" a date and its probability value.

So now we need to define a schedule margin to "protect" the deliverable. This is done by running the Monte Carlo tool with all the schedule margins removed - a zero slack deterministic schedule - and watching the desired deliverable date to see where it says the probability of completion is. In the world we work, an 80% confidence of completing "on or before" the desired date is common. The duration between the probabilistic date (80% confidence) and the deterministic date (zero slack) is the needed margin (probabilistic value) to "protect" that date.

This margin can be placed "in line." If a risk is named in the Risk Registry, Plan B for that deliverable is placed in the IMS once the Risk Management Board (RMB) accepts it. This is shown below.

When Plan B is turned to "execute," the IMS must have already planned for this, as shown above. But if the margin is not used, the risk, although planned, never comes true, and the IMS needs to absorb the unused risk margin for the future. This means moving unused margin forward. If this margin can not be moved forward, then the IMS will probably not be well structured, and some re-planning will be needed.

Here's a Compendium of Risk Management Resources

And our Risk Management book

And a collection of Risk Management briefings

• What is Risk? - Unrealistic technical performance expectations create cost and schedule growth, unrealistic cost and schedule estimates, inadequate risk assessments, unanticipated technical issues, and poorly performed and ineffective risk management, all contributing to program technical and programmatic shortfalls.
• Programmatic Risk Management - A not-so-simple introduction to the complex but critical process of building a credible schedule
• Building a Risk Tolerant PMB (Performance Measurement Baseline) - Using Earned Value to manage the risk of a project terms terms "risk-adjusted physical performance."
• Handling Risk on High Technology Programs - Without metrics, you're just another guy with an opinion - Stephan Leschka, Hewlett Packard.
• Managing Risk with Deliverables Based Planning - a 4-hour workshop following the guidance of Stephan Leschka of Hewlett Packard, when he says, "Without metrics, you're just another guy with an opinion."
• Risk Management Processes - Defense Threat Reduction Agency, March 27, 2012.
• Risk Management Guidance - Risk management is a critical success factor of any project or program. This document is a collection of risk management categories used to ask, “Did you think about this risk and its impact on our probability of success?”
• Uncertainty and Resulting Risk on Project Management - It’s popular to talk about risk in straightforward approaches to managing risk, like a step-by-step approach to making a list of the risk, assessing the probability of occurrence, and the impact if the risk were to occur.
• Comments on "Managing Projects Involving External Threats"
• Risk Assessment Template for Software Development or Acquisition Projects
• Managing Risk and Opportunity - 1st in a Series.
• Managing Schedule and Cost Risk - 2nd in a Series.
• The Risk Tolerant Master Schedule - 3rd in a Series.
• Risk Management and Agile Software Development - handling aleatory and epistemic uncertainties.
• Risk Management - in Gower Handbook of Project Performance for Agile, Waterfall and Everything in Between, 1st Edition 2017.
• Building a Risk Tolerant Schedule - Technical and Programmatic disruption in project plans don't need to negatively impact cost, performance, or schedule metrics
• 5 Proven Approaches for Mitigating Project Failure - Principles are needed before Practices and Processes can be successfully applied.
• Risk Management is How Adults Manage Projects
• Risk Management in Five Easy Pieces with Apologies to Jack - Managing Cost, Schedule & Technical Performance Risk is the Basis of Good Project Management.
• Five Easy Pieces: The Essential of Managing Programmatic Risk, 10th Annual Rocky Mountain Project Management Symposium, Colorado Springs, Colorado, May 2008.
• Applying Risk Radar to High-Risk Technology Projects - everyone involved in development, acquisition, or management talks about risk.
• Principles of Managing in the Presence of Uncertainties That Create Cost, Schedule, and Technical Risk, Risk Awareness Week, 11-15 October 2021/
• Practices of Managing in the Presence of Uncertainties That Create Cost, Schedule, and Technical Technical Risk, Risk Awareness Week, 11-15 October 2021.
• Programmatic Risk Management: A "Not So Simple" Introduction to the Complex but Critical Process of Building a Credible Schedule
• Assessing Enterprise Project Risk - Probability of Program Success P(s)
• 5 Proven Approaches for Mitigating Project Failure, American Management Association, 22 April 2015.
• Increasing the Probability of Program Success with Continuous Risk Management, Glen Alleman, Thomas J. Coonce, and Rick A. Price, Joint Space Cost Council.
• Increasing the Probability of Program Success with Continuous Risk Management, Glen Alleman, Thomas J. Coonce, and Rick A. Price, The Measurable News, 2018.04
• Managing Cost, Schedule, and Technical Performance Risk at Y-12 - Cost, Schedule, and Technical Performance Risk Management seamlessly integrates all three.
• Managing in the Presence of Uncertainty, PMI Mile High Chapter, 12 April 2019.
• Increasing the Probability of Program Success Using Risk+ - a workshop on the principles and practices of Risk+ and increasing the Probability of Program Sucess