Risk Management – Paradoxes and PLC

Two of the keynote speakers at the PMI Risk Symposium provided insights into how different risks change in priority over a product lifecycle (Esteri Hinman) and how effective risk management encourages poor risk management (Payson Hall).

Risks change over a product lifecycle

Esteri Hinman PMP (from Intel) presented that there are different functional groups involved over a product’s lifecycle with differing levels of risk management awareness:

  • Product Development: impacts related to cost / schedule / scope; proven processes; mentors available
  • Manufacturing and Delivery: impacts quality and revenue; processes known
  • Planning and R&D: “We don’t have any risks”; Opportunities reign; Risk Management not widely accepted

j0316768Notice the difference in risk management attitude and knowledge?  Would thisenvironment encourage  product development success?  Well, it won’t make it an easy path…

Across the Product Lifecycle, she characterized five “faces” of risk:

  1. Business:  Risk related to the eventual business value of the product
  2. Technology Risk related to the maturity of the technology required for the product
  3. Product:  Risk related to the commercialization of the product
  4. Development Risk related to the ability to develop the product
  5. Manufacturing: Risk related to the manufacturing processes of the product

The relative importance of each  “face” changes over the lifecycle and that a”Risk Footprint” is unique for each product.

Imagine a “wave” moving towards a beach, where the wave represents one type of risk. The beach is when the wave is minimized, similar to the level of risk when a product has started being delivered to the customers.  Imagine five “waves” at different intensities and on top of each other – that is a Risk footprint.  And imagine your company is riding the “surfboard” on top of those waves. Got the idea?

Her final point: “It’s about the Business”.  Thanks to Ms. Hinman and Intel for this insightful presentation!

Risk Paradox: Why Effective Risk Management Seems to Encourage Poor Risk Management risk talking blah

Payson Hall’s topic provided great understanding into the lifecycle of a organizational risk management practices.  Not doing justice to his creative and well-organized presentation, the lifecycle was described as:

Nearly non-existent –> Scattered & Episodic –> Coordinated & Increasingly Effective –> Calcified & Process-Bound –> Decaying & Sporadic –> Nearly Non-Existent

So why does this cycle occur? One possible cause he described as Framing bias. If we were asked to choose between 80% chance of losing $4000 or 100% chance of losing $3000, most people would pick the former.  His evaluation of this situation:

“Humans aren’t risk averse, but are “losing averse” & perceive possible losses as a greater threat than possible gains.  We have a bias toward taking greater risks to avoid losing.”

There are also challenges to maintaining effective management practices.  One I particularly like is the fact that “Risk Management isn’t Sexy”.  Comparing a fireman to a fire inspector, who do you think saves more lives?  Preventive measures aren’t attractive – heroes are.

His suggestions for stabilizing this effect:

  • Implement in slow & deliberate steps
  • Seek executive input about which risks to address; Keep them involved
  • Take credit for wins AND losses; don’t oversell the benefits

These suggestions are useful for any type of long term organizational change.  His main point was to keep telling people how risk management is helping the business, all the time.

If you have a chance to see Payson’s full presentation, make the effort! It will be worth it!


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