Typically, companies are familiar with using SWOT analysis to identify where a company can go before they launch. But once a firm enters a market, a risk mitigation strategy is a critical tool to guide them throughout the project life cycle.
Risk mitigation is a core part of every exercise and client engagement that we do. It is not merely the process of eliminating risk, but rather minimizing risk while still achieving an objective. At MKA Insights, we help clients proactively manage potential risks associated with variation and foreseen uncertainty, as well as assist them in addressing unforeseen uncertainty risks to get them back on track.
MKA Insights uses multiple frameworks to assist clients in developing risk mitigation strategies.We often reference the work of A. De Meyer et al. published in 2002, “Managing Project Uncertainty: From Variation to Chaos.”
Risk Types: Variation, Foreseen Uncertainty, Unforeseen Uncertainty, Chaos
According to De Meyer et al, risk comes in the following forms:
1. Variation (e.g., weather)
Small influences that have a range of values for a project (weather delays, design delays) that were different than anticipated. This variance is an acceptable part of each project, and it should be accounted for early in the project plan. Experienced professionals know that final projects always deviate from the original baseline.
2. Foreseen Uncertainty (e.g., contract delays)
The team cannot be sure that identifiable and understood influences will occur. Managing risks associated with variation and foreseeable uncertainty requires knowledge and expertise.
3. Unforeseen Uncertainty (e.g., pandemics)
As the title suggests, projects may introduce unpredictable elements, and therefore, no advance plan exists. The pandemic provides a recent real-world example that triggered a chain reaction of closed borders, shipping delays, stock-outs, and resource constraints.
4. Chaos (devolution of the plan)
Chaos can arise due to a combination of inadequate planning, an inability to adhere to the plan, or when an unforeseen uncertainty derails the project plan, causing it to deviate from its original intent.
Understanding and Managing Risk
We also borrow frameworks from NASA, which has published manuals on risk mitigation, project planning, and product development activities. Like NASA, we approach each client engagement with the mindset that failure is not an option. In particular, we deploy concepts from NASA’s Technology Readiness Levels framework, which deftly tracks the progression of emerging technologies from ideation to deployment.
Understanding risks allows managers to better respond to uncertainty and avoid organizational breakage.
The pandemic provided a case study in risk management, as multiple projects devolved into chaos. Under sustained strain, not only can projects break down, but so can organizations. The chart below illustrates what happens when risk-mitigation planning is not incorporated early on in a project’s life cycle.
During the normal course of a project, there is a normal state of operations (blue line) in which resources are being used. At any given moment, that project is able to take on excess capacity (yellow line) to accommodate an increase in demand.
The red trend line charts when firms exceed normal excess capacity limits and goes into a sprint mode. In small spurts, a sprint is not going to break the project. However, when an organization operates at this sustained level, it loses the ability to troubleshoot, which means that the firm will inevitably run into problems it should have been able to foresee.
Risk planning does not eliminate the need for excess resources or surge troubleshooting. However, it grants an organization time to plan in advance. This in turn allows a firm to move in a smoother way until the demand for additional resources is reduced.
Both the red and green curves deal with uncertainty and chaos risks. The difference is that when an organization plans for uncertainty in advance, it can minimize the negative impacts, thus preventing organizational breakage or employee attrition.
