Proactive Risk Management

Research-Technology Management, November/December 2002 | Go to article overview

Proactive Risk Management


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New Books and Reports For Leaders of Technological Innovation

Proactive Risk Management; Preston G. Smith and Guy M. Merritt, Productivity Press, New York NY,- 2002; 226 pp. $32.95.

"Witnessing teams develop new products," write Smith and Merritt, "we have often been astonished to see 'surprises' (that is, problems) pop up late in the project-which in fact should have come as no surprise at all. Indeed, in some cases, the very same problems had arisen before in other projects. In others, someone involved with the project suspected early on that a problem might occur, but no action was taken.... The developers fully intended to address a potential problem, but either a lack of time or a focus on other priorities prevented that from happening, and so that problem did not rise to a critical level of importance until it was too late."

The primary aim of this book is to help product development teams identify such surprises early in the project and manage them so as to diminish any disruptions. To this end, Smith and Merritt, founder and principal of New Product Dynamics and program manager at Tellabs respectively, have included the following features.

* A model of a specific risk that coalesces the team's energy around vital elements of a risk and its drivers, thus enabling the team to identify, prioritize and manage major risks effectively.

* Guidance on identifying drivers of risks, so that readers can manage the root causes of a risk rather than its symptoms.

* Appropriate quantification of the key factors of a risk, so that risks can be prioritized without introducing errors that render the numbers meaningless.

* A clear distinction between a risk and an issue, which requires a different type of management.

* Supporting tools and strategies to enhance the implementation of project risk management.

* Emphasis on the organizational and cultural impediments that can undermine implementation of an effective risk management program, as well as means of overcoming them.

They also observe that their risk management process fits closely with the approach to managing risk suggested by the Project Management Institute (PMI), the U.S. Department of Defense, and several project management and software development books.

The types of risk and authors' risk model and management process are explained in the first three chapters. The next five chapters cover the five steps of the process:

* Chapter 4: Step 1-Identifying risks and their impacts, preceded by the planning needed to initiate the process;

* Chapter 5: Analyzing risks, including identifying their drivers, determining their likelihoods, and calculating their expected losses;

* Chapter 6: Prioritizing risks, so that readers can take action on the most important ones; a step, the authors assert, that often appears only tacitly in other sources;

* Chapter 7: Resolving risks, which includes alternative action planning approaches, such as transferring or preventing the risk and arranging a contingency plan should the risk event occur;

* Chapter 8: Ongoing monitoring of action plans, retirement of successful plans, and identification of new risks that threaten the project.

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