Managing Risk Beats Managing Issues: How to Integrate Risk Management into Your Large Capital Project
Category: Thought Leadership
“An ounce of prevention is worth a pound of cure.”
“If you don’t take time to look after your wellness, you will be forced to make time to deal with your illness.”
These sayings reinforce the importance of maintaining good health. They remind us that it’s critical to value prevention over correction — investing time, resources, and effort while you’re still healthy.
If you ignore this advice, you may face consequences. Your choices in the future may be limited, and the best outcome may no longer be available. The wake-up call has been sounded. Major changes may be needed.
While this is all true for personal health, it’s just as true for project health.
A risk management program is a preventative tonic. Implementing — and sustaining — a project risk management program reduces the chances that your project will face undesirable health consequences.
To do so, your organization must invest in personnel resources, tools, communications, and learning.
Why risk management > issues management
Many organizations struggle to assign meaningful resources to risk management. But they often have no problem “scrambling the jets” when issues — the consequences of realized risk — arise.
Why do we value fire fighting over smoke detection? Is it an adrenalin boost?
There is a sense of heroism when someone recovers a dire situation. But often, the recovery effort leads to collateral damage, including burnout and cost increases.
A reactive project environment is a failure — make no mistake. Every issue to be dealt with distracts the organization from its goals. And contractor and vendor partners may take advantage of the decision-making scrambles and urgencies that realized risks create.
Operating in a state of constant emergency wears on people and consumes funds. It’s not sustainable for the success of large, multi-year projects.
To be clear, investing proactively in risk management may not eliminate everything that goes bump in the night. But it will provide a sense of foresight, control and managed strategic decision-making that doesn’t exist when a project is just surviving day to day.
The power of effective risk management
Effective risk management is crucial for the success of large, long-duration capital projects. That’s especially true when those projects are pioneering in nature or using “first of a kind” technology. Such projects often face unique challenges and uncertainties that can affect cost, schedule, and overall project outcomes.
To navigate these complexities, it’s essential to have dedicated resources with expertise in risk management and mitigation involved throughout the project delivery process — within both project owners and vendor organizations.
This proactive approach not only makes projects more resilient, but it also minimizes the potential for costly delays and failures.
Including skilled resources specialized in risk management brings several strategic advantages.
First, these professionals can identify potential threats and opportunities early. They can analyze and understand “what-if” scenarios and develop contingency strategies.
Second, early identification allows project teams to develop effective mitigating actions that are informed by business priorities. Planning the best actions to take ahead of time will reduce both the likelihood and the impact of any adverse events.
Finally, experienced risk managers, alongside experienced operations and construction personnel, can also provide invaluable insights, guidance and “been there, seen that, done that, learned that” knowledge throughout the project lifecycle.
This will help stakeholders make informed decisions to steer the project towards successful outcomes.
Steps to creating an effective risk management approach
To effectively integrate risk management into the project delivery organization, a tactical approach is essential.
Risk management is indeed “real work.” Leadership needs to budget for it. The organization needs to treat risk management not as an additional low-value task, but as an integral part of project governance and decision-making.
Organization management must define clear roles and responsibilities for risk management activities across the project team. They must also encourage team members to actively identify and report risks, fostering transparency and accountability in managing project risks.
The following steps will help establish a framework for an empowered, engaged, and effective risk management approach:
- Establish a dedicated risk management team led by a qualified risk manager with relevant industry experience. This team should work closely with project managers and other key stakeholders to seamlessly integrate risk management activities into project planning and execution.
Then, provide this team with adequate resources and tools. These include risk assessment frameworks, software systems for tracking risks, and regular reporting mechanisms and forums to facilitate analysis and timely decision-making. - Invest in training and development programs for the project team on risk management principles and practices. This will empower team members to contribute effectively to risk identification, assessment, and mitigation efforts throughout the project lifecycle.
Foster a collaborative environment that encourages knowledge sharing and cross-functional collaboration and leverages diverse perspectives to anticipate and address potential risks.
Early on, lessons learned integration should be a primary source of both core scope and risk identification for repeat projects, Nth-of-a-kind projects, or projects with common features, execution methodologies or resources (even if the scope isn’t apples to apples). - After launch, promote a culture of continuous improvement in risk management practices. Conduct regular lessons learned sessions and post-project reviews. Capture insights gained from previous projects. Then use them to refine risk management strategies and help make the organization more resilient in the face of future challenges.
Adopt a flexible and responsive approach to managing risks, so you can effectively handle unexpected events or changes in project scope. This ensures that risk management remains dynamic and proactive. It should never feel like the team is “just going through the motions” or that risk management is primarily an administrative effort.
Active risk management is essential for success
Integrating skilled and knowledgeable resources into risk management and mitigation activities is vital for the success of large capital projects, particularly those that are pioneering in nature.
By designing the project delivery organization to prioritize risk management, project teams can allocate resources to prevention instead of correction. In doing so, they will more effectively navigate uncertainties and safeguard project objectives.
And by fostering a culture of proactive risk management and continuous improvement, organizations can mitigate potential threats and capitalize on opportunities.
Addressing risks proactively minimizes the need for reactive measures, which are more disruptive and resource-intensive, and less effective in mitigating the impact of unforeseen events. This ensures that complex projects are sustainable and successful long-term.
Ultimately, integrating skilled resources into risk management activities from the outset enables projects to achieve greater predictability, resilience, and overall cost-effectiveness throughout their lifecycle.