02.04.04
 By
Eileen Strider
When you invest in a major IT project, you expect significant value.
If you didn't, you wouldn't start the project. At some level you know
that achieving the value is not going to be risk free. Here's the
$64,000 question. Is the value worth the risk? Many IT software vendors
would prefer you think only about the value and not about the risk.
Their sales process may not include helping you understand the risks
you will have to manage to gain the value.
The $64,000 Question
Answering
the $64,000 question requires open, honest and realistic discussion
of both the value and the risks. You need to understand specifically
from where the value will come and how you will achieve the value
in measurable terms. You also need to understand where the risks lie
and what you can do to avoid, mitigate, and manage them. There will
be technical risks and business risks. Your ability to capture the
value is a business risk and a big one. |
For example, let's say you're
replacing your purchasing system. The value will come from streamlining
your purchasing processes including how you work with vendors as well
as reorganizing your purchasing department. These changes come with
significant risk that your purchasing staff and vendors may resist
the required changes in how they work. Achieving the expected value
will depend on how well you are able to mitigate and manage this risk.
Software vendors may be willing to address technical risks because
that is what they understand, control, and can mitigate. The software
vendors shouldn't and don't control your business processes, vendor
relationships, organizational structure, or people's behavior in terms
of accepting or resisting change. It is your job to recognize, understand,
and manage this risk.
Eyes-Wide-Open
Understanding the details of both value and risk leads to an eyes-wide-open
business decision regarding whether to proceed with a project or not.
But for some organizations, saying aloud anything about risk is considered
heresy, disloyalty, incompetence, or defeatism. Some people are superstitious,
worrying that the mere mention of a risk will cause it to happen.
Some people would just as soon close their eyes and pretend there
are no risks. If you can talk about only the value, you may find your
project in a crisis during the process re-design phase or in the middle
of implementation. Or you may complete the project only to discover
that the value you expected will never be achieved. Dealing explicitly
with risk increases the probability of achieving value.
Risk Management
You manage risk from a project's inception through implementation
and post-project achievement of the value. Here are the general risk
management steps:
1. Specify and quantify the value expected.
2. Identify and analyze the risks, including the probability
of occurrence and severity of the impact.
3. Develop a mitigation plan. The mitigation plan defines actions
you will take to reduce the probability of a risk materializing and
to reduce the cost of containing that risk when it materializes. Mitigation
activities are performed before the risk materializes and whether
or not it materializes. These activities are included in the project
plan in terms of tasks, schedule, and budget.
4. Develop a contingency plan. The contingency plan defines
actions you will take when a risk materializes to contain its impact
on the project. The contingency plan is used to identify and reserve
time and money that will be spent only if the risk materializes.
5. Manage risk throughout the project by monitoring pre-identified
triggers that indicate a risk is materializing and invoking your contingency
plan.
There are numerous risk management models, techniques, and tools available
from very simple and straight-forward to highly sophisticated. Some
have automated risk calculators. Pick one that fits your organization's
culture and readiness to deal with risk.
Your First Step
The first and most important step you as an executive can take is
to legitimize risk by making it a topic you openly discuss and by
demonstrating your willingness to be responsible for your part in
managing risks to achieve the expected value.
About the Author:
Eileen Strider conducts project reviews, project retrospectives, and
IT organization assessments based on experience as a developer, project
manager, IT manager, and CIO. She provides coaching for business and
IT executives and fills in as a temporary CIO. With her partner Wayne
Strider, she leads the annual Strider & Cline Leaders' Forum. Her
articles have been published in STQE magazine and on Stickyminds.com.
To read more articles, go to http://www.striderandcline.com/takeaways.shtml
or contact her at eileenstrider@worldnet.att.net.
Read this newsletter at: http://www.ctoupdate.com/2004/0204.html |
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the Forum: |
| Asleep At The Wheel? |
 I'm a content guy. Trust me, not a programmer. But in this world you need to understand the fundamentals of programming if your interested in developing new applications. And new applications are where the fun and money are hiding. The fun is in the development of new ideas, the money, it'll come as a reward for new and innovative applications. ...
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