Implications of risk management on project planning

Risk can be defined as an event or an obstacle that impedes the successful completion of a task
(Zwikael and Smyrk, 2011; Kerzner, 2013). Risk can also be measured by the implementation of risk
assessment frameworks and metrics (Meredith and Mantel, 2012) that help understand, quantify
and qualify the object of focus. Nevertheless, even though risk can be measured both quantitatively
and qualitatively it can be never be eliminated (Chapman and Ward, 2004). The purpose of this
critical evaluation is not necessarily to focus on risk within a specific project but rather on how risk
manifests itself as an influencing factor from within an organizational culture.

Couillard (1995) cited in Zwikael et al. (2014, p.436) states that risk events can be classified into
three groups: 1. Risks linked to technical performance, 2. Risks linked to budget, and 3. Risks linked
to schedule. These categories of risk are not unique to project management as will be shown below
but also in many cases are unfortunately out of the project manager’s control without a ‘solid and
reliable’ planning process (Pinto, 2013; Magdalena and Alina, 2010). Furthermore, Pinto (2013)
highlights seven deadly sins in the form of errors that organizations make when planning a project
that inherently increases the risk in the three inter-related areas below.

Risks linked to technical performance

Risks linked to technical performance are affected by factors that are both internal and external to
the organisation. Pinto (2013) refers to areas such as optimism bias (when the policy of the
organisation is to allow sales and marketing colleagues to broker a deal without sufficient input from
the project management side, therefore leading to a potential over-promise, unrealistic time frames,
and unrealistic budgets). The idea of non-alignment is also highlighted in Meredith and Mantel
(2012, p.226) when they state that there is increased risk when ‘marketing has promised
deliverables that engineering may not know how to produce on a schedule that manufacturing may
be unable to meet.’

Additionally, external competitive forces may override initial plans i.e. competitors may have a
quicker go-to-market strategy and therefore the urgency to launch may affect the quality of the end
product by having to speed up development and/or reduce schedule. Porter’s five forces model
(2008), taken from marketing, is a useful way of understanding the threat of emerging competitors
based on external market drivers as well as internal strengths and constraints. This also reinforces
the idea that organizational expertise and understanding needs to be aligned and feeding into a
proactive planning process.

Risks linked to budget

Budgetary risks are probably the most common examples of risks and can also be affected by
external factors to the project. Investment funds can dry up due to the product being late to market,
changing focus of the organization due to external factors such as changes in market preference,
changes in government regulations and changes in strategic direction for the organization amongst
others (Pinto, 2013; Collyer et al., 2010). This may lead to management demanding that tasks be
‘crashed’ (Kerzner, 2013) through plan massaging (which could be time reduction, additional and/or
new scope (Pinto, 2013) thus leading to project death marches (Yourdon (2004), cited in Pinto (2013,
p.647) in which motivational levels of participants is extremely low with no realistic chance of
completing the task.
The following section around scheduling risks is intrinsically linked to risks around the budget due to
the fact that the external market is now moving so rapidly, the need for dynamic planning processes
is essential to be able to respond to these changes (Collyer et al., 2010).

Risks linked to scheduling

A change in project duration can occur even after a detailed planning process has been carried out
by the project team and has included all key stakeholders (Meredith and Mantel, 2012) by a
management override (Pinto, 2013). This override can be due to factors mentioned above i.e.
market pressures, investment funds and urgency for end product, etc. but it can also occur because
management do not ‘believe’ in the time estimates offered by the project team. Williams (1999)
highlights the fact that the network simulation through the PERT or CPM have not been accurate in
their estimations of the real time needed to complete a task. This has been due to the fact that the
estimation is derived from the mean estimated time and is therefore naturally skewed from the
outset. This has led to management shortening the project duration as they feel that the project
team has factored in overall project slack time already (Pinto, 2013) i.e. there may be a trust issue
leading to an us and them situation with the project manager in the middle.

What does this mean for the project manager?

Alignment is key to a successful planning process as well as making sure that all key stakeholders are
informed and participate in decision making (Meredith and Mantel, 2012). Nevertheless, project
managers need to also include tools and models that come from other areas of the business to be
able to plan effectively i.e. Porter’s five forces model (2008) taking into account external trends and
tendencies thus making the process more proactive rather than reactive (Pinto, 2013). A certain
amount of flexibility also needs to be factored into the planning process so as to allow for changes in
the project landscape i.e. through rolling wave techniques (Collyer et al., 2010) and moving away
from a deterministic approach (Williams, 1999).

Additionally, in order to restore ‘trust’ between the project teams and management, time estimates
need to be calculated with input from all stakeholders so that requirements are delivered to spec, on
budget and on time as much as possible without suffering from the Parkinson effect (Williams, 1995)
whereby project participants work more to deadlines and slow down the work to meet the deadline
as opposed to completing it earlier.

Limitations with studies evaluated

The limitations that stand out the most from the articles are related to the somewhat generalised
nature of importance of each area in the planning process i.e. that all processes were of equal
importance (Zwikael et al., 2014). This affects the reader’s appreciation of the criticality of each of
the elements. Finally, future research should focus on the impact of the organisational approaches
to managing risk and how in conjunction with project management risk frameworks the planning
process can become more iterative and respond better to the complexities and constraints of future
projects.
References

Chapman, C. & Ward, S., (2004) ‘Why risk efficiency is a key aspect of best practice projects’,
International Journal of Project Management 22 (8), pp. 619–631.

Couillard, J., (1995) ‘The role of project risk in determining project management approach’, Project
Management Journal, 26, pp. 3–15.

Collyer, S., Warren, C. M. J., Hemsley, B., & Stevens, C., (2010) ‘Aim fire aim – project planning styles
in dynamic environments’, Project Management Journal, 41(4), pp.108–121.

Kerzner, H., (2013) ‘Project management: a systems approach to planning, scheduling, and

controlling’, 11th edition. New York: John Wiley & Sons.

Magdalena, D & Alina, D. (2010) ‘On Calculating Activity Slack in Stochastic Project
Networks’, Managerial Challenges of the Contemporary Society, (1), pp.55-59. Available at:
https://liverpool.idm.oclc.org/login?url=https://search.ebscohost.com/login.aspx?
direct=true&db=bth&AN=77410435&site=eds-live&scope=site (Accessed: 19 March 2019).

Meredith, J.R. & Mantel, S.J. (2012) ‘Project management: a managerial approach’, 8thedn. New
York: Wiley.

Pinto, J.K., (2013) ‘Lies, damned lies, and project plans: recurring human errors that can ruin the
project planning process’, Business Horizons, 56(5), pp. 643-653.

Porter, M. E., (2008) ‘How Competitive Forces Shape Strategy’, Harvard Business Review, 57, 2
(March–April 1979), pp. 137–145.

Williams, T.M., (1995) ‘What are PERT estimates?’, Journal of the Operational Research
Society, 44(12), pp. 1498-1504.

Williams, T., (1999) ‘Towards realism in network simulation’, Omega, 27(3), pp. 305-314.

Yourdon, E., (2004) ‘Death march (2nd ed.)’, Upper Saddle River, NJ: Prentice-Hall.

Zwikael, O., Smyrk, J.R., (2011) ‘Project Management for the Creation of
Organisational Value’, Springer-Verlag: London.

Zwikael. O., Pathak, R.D., Singh. G. & Ahmed, S., (2014) 'The moderating effect of risk on the
relationship between planning and success', International Journal of Project Management,
32(3), pp. 435-441