Bridging the Risk Gap: The Failure of Risk Management in Information Systems Projects: Project Managers' Tendency to Focus on Risks That Are Familiar, Measurable, and Controllable Leaves Projects Vulnerable to Risks

By Kutsch, Elmar; Browning, Tyson R. et al. | Research-Technology Management, March-April 2014 | Go to article overview

Bridging the Risk Gap: The Failure of Risk Management in Information Systems Projects: Project Managers' Tendency to Focus on Risks That Are Familiar, Measurable, and Controllable Leaves Projects Vulnerable to Risks


Kutsch, Elmar, Browning, Tyson R., Hall, Mark, Research-Technology Management


It is well understood that new product development (NPD) projects are risky endeavors (Cerpa and Verner 2009; Smith 1999; Nelson 2007) and that the management of risk is a vital task for managers in these types of projects. A plethora of canonical risk management standards has emerged (see, for instance, Project Management Institute 2013), and these are promoted as being self-evidently correct and entirely sufficient: "following these procedures, it is implied, will produce effectively managed projects" (Williams 2005, 498). In most cases, the prescription for risk management consists of a standard operating procedure comprised of often mechanically performed activities. Typically, these processes revolve around a three-stage process: forecasting individual risks, assessing their importance, and identifying an appropriate response. First, managers identify uncertainties that may affect the project's ability to meet its objectives. Then they assess the likelihood that the uncertainties will become real, as well as the consequences should they actually emerge. Finally, the risk management procedure prompts managers to formulate a response to address each significant risk. Thus, the overarching premise of risk management is a reductionist, predictive analysis that takes large, complex problems and reduces them to smaller problems that can be managed in isolation; this reductionist approach works well where linearity holds sway, but such situations are increasingly rare.

However, for all the talk about the need to coordinate a repetitive set of organizational activities to manage risk, and for all the quantitative mechanisms available to risk managers, there is growing evidence that risk management is often ineffective. Such ineffectiveness is often attributed to factors such as lack of knowledge or inadequate integration of stakeholders into risk management activities (Nelson 2007; Hubbard 2009). Our research adds to the understanding of why risk management is ineffective by showing the rationale project managers use for not following accepted processes for managing risks. As a consequence of these rationales, risks remained unmanaged--either unidentified, unassessed, or un-responded to. To respond effectively to risks, companies need to bridge the gap between ideal risk management procedures and the actual conditions on the ground in NPD projects. To do this, the rationales managers use to exclude risks from active management must be identified and addressed. Our work offers one approach to this problem.

The Study

Our study set out to investigate the gap between risk management prescriptions and actual practice. In particular, we studied whether, to what extent, and why managers of NPD projects may not follow established prescriptions for risk management, thus allowing their projects to remain vulnerable to risks. We invited 11 global computer services providers to participate in the study; participants were selected for their global reach and the comprehensiveness of their product offerings.

Within these 11 organizations, we identified 19 information systems projects that experienced one or more critical incidents characterized by radical deviations from project plans in spite of complying with risk management frameworks. For example, one of the projects was the development of a major information system for the German Stock Exchange, involving transformation from a client-server infrastructure to a terminal-based solution. Halfway through the project, a major software incompatibility issue threatened to suspend the entire project, with significant ramifications for both the service provider and client. We wondered how such major risks slipped through the risk management processes and cascaded into such a critical incidents. We identified one or two critical incidents in each project to be studied in detail, yielding a total of 26 critical incidents for study.

The critical incidents were researched retrospectively, in a stepwise manner. …

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