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Managing project risks safely:
How to incorporate the organization's risk culture into project management
“No risk, no fun” or excessive caution? The risk culture shapes the way management and staff behave in projects. How to promote a healthy approach to project risk management.
Everything will be just fine? When it comes to projects, large companies cannot afford such naive optimism. Crisis scenarios such as the following are not uncommon:
An IT system go-live is delayed, not by days or weeks, but by several months. The reason is a software update that no one had planned for. Several project teams are unable to continue, and the company is forced to either ‘park’ people at high cost or let them go.
Who wants to be in the shoes of the people in charge here?
Risk culture influences the chance of success
At best, the project team is prepared for such scenarios. After all, risk management is one of the fundamentals of project management. But while few would doubt this in theory, in practice the situation is often different.
Sometimes risks are ignored with a shrug of the shoulders, sometimes they are tracked so meticulously that everything takes far too long. Both extremes jeopardize project success.
What is the risk culture in your project environment? And what can you do in project management to ensure that everyone involved deals with risk sensibly?
We’ve put together the essential dos and don’ts for you.
What characterizes the risk culture in a company?
The risk culture is characterized by
1. Risk attitude: How do management and employees perceive project risks? How risk-aware or risk-averse are they?
2. Actual practice: How do management and employees deal with risks in everyday project work?
3 challenging risk cultures – and how to deal with them
The following three types of culture are often encountered in projects. Of course, they are exaggerated and never occur in their pure form in reality. Nevertheless, the typology is helpful because project management works very differently in different environments.
(To access one of the following sections directly, click on the subheading:)
1. Action Culture – low risk awareness
Just do it, and don’t discuss it at length – this is typical of an Action Culture. Project participants accept risks in order to achieve quick outcomes. As a result, many initiatives start without structured risk assessment. The team usually only deals with problems as they arise.
The risk-taking attitude is seen as entrepreneurial. And it has its strengths: it encourages creativity and a fast pace. On the negative side, there are relatively many failed projects that might have been salvageable under different conditions, or that were not the best idea in the first place.
How can you maintain positive thinking in a culture of action and at the same time increase the chances of project success?
Good practice:
- Convince the project managers of the benefits of risk management. For example, argue with benchmarks or industry experience.
- Whenever you talk about risks, mention the opportunities. Emphasize that risk management increases the chances of success.
- Emphasize the learning effect: Reflecting on risks – and possible failures – offers the opportunity to learn from them , improve results and become even more innovative.
- Set up risk management in a lean way, like this: The Project Management Office (PMO) asks the project teams about their risks once a month. These risks are then assessed according to certain criteria and reported to the monthly steering committee.
- The reporting should not include the entire list of risks but, e.g., only the “A risks” with a high impact and high probability of occurrence.
- If possible, calculate risk reserves generously, i.e. allow for a larger buffer in the planning phase in order to be better able to compensate any risks that arise.
Better avoid:
- Do not give in to resistance, which is to be expected, but work resolutely towards a compromise.
- Don’t get caught up in the rush and let risk management “slide”.
2. High Security Culture – strong risk aversion
In this environment, project participants have a high need for security. From a risk management perspective, this is a blessing: No one questions the task itself. On the other hand, decisions and processes can drag on for far too long,so that important projects do not get off the ground properly or are put on hold as soon as a path no longer seems safe.
How can you incorporate high-security thinking into your risk management?
Good practice:
- Talk about risk management in detail from the outset and present a clear plan so that a feeling of security is established and decisions are made more quickly.
- Involve participants and stakeholders closely in order to identify and assess the risks together with them, e.g. in a risk workshop.
- Monitoring can also be detailed and granular . For example, you can include the topic in the weekly status reports and also maintain a cross-project issue log.
- Build trust through frequent status meetings in the project team and with the sponsors, e.g. with a check-in at the beginning and a check-out at the end of the week.
Better avoid:
- Just sitting out discussions that drag on for more than two weeks. Instead, work towards decisions and provide support.
- Alarmist communication, e.g. painting the worst case in bright colors. It is more important to talk about proven solutions.
3. “Bella Figura Culture” – saving face is what counts
From time to time, project participants and stakeholders avoid responsibility. Nobody wants to spend energy on risk management. Indications of risks are acknowledged, but tend to be downplayed or ignored altogether.
These people like to present their own progress in a glowing light, even if this image does not correspond to reality. When problems arise that cannot be hidden, the first thing they do is blame others or external circumstances.
This is a difficult environment for your project management. What can you do?
Good practice:
- Seek management support for rigorous risk management. Raise awareness of the problem by using empirical evidence and benchmarks.
- Status thinking is often very pronounced in this culture.
Demonstrate that risk management contributes to the personal track record and thus to the status of those involved and stakeholders. - Communicate clear expectations for reporting: if there are problems, the “project traffic light” must turn yellow or red immediately.
- Be considerate of difficult political situations and discuss critical points bilaterally before discussing them in a larger group.
Better avoid:
- Coming across as lecturing. Rather be supportive by emphasizing the benefits of risk management from each stakeholder’s perspective.
- Do not rely on verbal agreements, but document exactly what has been agreed and who is responsible for what.
Risk culture should not to be underestimated
Cultures cannot be changed overnight. This makes it all the more important to adapt in project management – so that the culture does not become a risk for the project itself.
2024-09-23, grosse-hornke
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