Introduction to Mastering Risk and Procurement in Project Management: A Guide to Planning, Controlling, and Resolving Unexpected Problems
Organizational Culture of Risk Planning
Organizations in which projects are a large component of the business strategy have an understanding of the potential impact risks can have on not only projects, but throughout the organization—and so they often have a strong risk awareness culture. Organizations that are structured with functional departments that carry out day-to-day operations that do not necessarily function on a project basis and are not intimately associated with the organization’s business on the whole, can struggle with the concept of risk management in how problems on a project can affect an organization.
Regardless of the organization structure, a project manager assigned to oversee a project must ensure certain project processes are developed and will be used throughout the project lifecycle. This is important, as processes are used to outline what is required as well as to ensure consistency in the process. As the project manager is addressing the area of risk and procurement on a project, she must also ensure processes are in place to manage these items.
- Risk and Procurement as a Process—As an organization matures with the use of projects, hopefully staff within the organization is also seeing the benefit of processes used to manage risk and procurement throughout a project lifecycle. The benefit of developing a process is it provides a step-by-step instruction to conduct items, which is important to effectively manage what the process is developed for. This book includes processes that can be used in managing all aspects of risk, as well as procurement on most types of projects. Although these can be simple processes, they can be used on complex projects and in their simplicity can be easily understood by not only a project manager but by other project staff that may be assisting with project tasks. It is important that the development of a process remain simple, as the fundamental steps can be used on either simple projects or complex projects, but those using the process will not lose sight of the overall concept of what the process is trying to accomplish.
- PMBOK Processes—The Project Management Institute (PMI) has published a book called A Guide to the Project Management Body of Knowledge (PMBOK Guide) that is used worldwide as a standard project managers can follow that will assist in the understanding of processes used throughout all aspects of managing projects. Several processes regarding risk and procurement management called out in the PMBOK are used in this text for general conceptual understanding of risk and procurement management and, in many cases, are explained in further detail and with the use of examples in regard to specific applications.
Documentation—As the project manager develops the overall project management plan, there are several individual plans included that outline all of the process steps required for each aspect of the overall project. Other documents used in the organization that will house information regarding project activities may include documents within the Accounting department, Procurement department, Project Management Office (PMO), and Human Resources, as well as general documents such as a Lessons Learned document included with the completion of each project. With regard to risk management and procurement management, there are two primary documents used in the project management plan that outline all specific steps required for each of these two areas, which include:
- Risk Management Plan—Houses all of the information regarding how risk is to be managed throughout the project lifecycle. This includes identification of risk, analysis of risk, response plans, documentation of risk and responses, and any staff identified to assist in managing risk throughout the project lifecycle. The risk management plan also includes all of the processes used and specific steps required to correctly and effectively carry out each aspect of managing risk. The project manager is typically the owner and manager of the risk management plan for each project and would be the individual responsible for developing the plan and/or any modifications or additions to the plan throughout the project lifecycle.
- Procurement Management Plan—Houses all of the information regarding how procurement should be conducted throughout the project lifecycle. This plan is typically developed as a joint effort between the project manager, the Procurement department, and sometimes the Accounting department. It houses all of the processes required to correctly and effectively carry out procurement throughout the project lifecycle. This can include conducting purchases, negotiating contracts, any specific pricing schedules that might be required, as well as roles and responsibilities required to negotiate contracts and effectively conduct procurement. This document can be developed by either the project manager or the procurement manager, and both of these individuals will need to have a clear understanding of the development of processes within the procurement management plan; roles and responsibilities of management overseeing aspects of procurement; and the management of human resources that will be conducting procurement and accounting functions. The important aspect here is that all processes required are included in the procurement management plan, and that everyone involved in this plan is on the same page as to the understanding of the processes included.
Lessons Learned—Another important document that is used throughout project management is the Lessons Learned document used to record not only problems relative to risk management and/or procurement, but successes due to processes that were designed and implemented, resulting in a positive outcome. The Lessons Learned document is typically regarded as an important document within project management, as project managers use this document at the beginning stages of developing a project to avoid problems that have occurred on prior projects.
Project managers can use valuable information from prior projects in the development of the risk management plan in identifying potential problems and successful responses of problems that occurred on prior projects. This can save the project manager a great deal of time (and in some cases, guesswork) as to what a successful response to a particular risk might be. Project managers can also use the Lessons Learned document to gain valuable information on prior purchases or the use of subcontractors to avoid problems or issues seen on past projects. This can, in some cases, save the organization a great deal of money and time in selecting a more appropriate response to a risk over a response that might have made more sense if other details of the risk had been unknown. Lessons Learned documents have proven to be a valuable source of information for the project manager in developing the project management plan and should always be a document every project manager develops and uses throughout the project lifecycle to record information that would be valuable for later use.
In many ways, the success of a project manager can be boiled down to the simple fact of how much information he has and how he uses that information to develop and manage a project. Project managers are the first to admit that knowledge is power, and the more they know about their projects at the beginning stages, the better they can plan. The two key components in planning are to correctly identify what has to be accomplished in work activities to complete a project deliverable, and how to effectively address and manage problems that occur throughout the project lifecycle that could impact budget and schedule.
Project managers are generally tasked with the development of a project management plan, and how the project manager develops this plan largely dictates its success. It is incumbent on the project manager to view the project in a best-case scenario where simply planning all of the activities and resources required to accomplish an objective should be sufficient, but planning for problems is equally as important, given their potential to destroy or delay a project. All too often the project manager gets wrapped up at the beginning of the project in ensuring that all of the normal activities, resources, and purchases are in place but does not leave time to identify and plan responses for potential problems. If the project manager has allocated time to design a project that will be conducted correctly, ensuring a project deliverable is completed on budget and on schedule, it is also the project manager’s responsibility to plan for risks and responses that will also ensure the project deliverable is completed on schedule and on budget. The project manager, in planning risk responses and procurement in advance of the project, is actually being proactive in protecting the project from its own resources and activities.