Do You Know These 5 Questions Which Reduce Risk?

Every Project Has Risks

The work may take too long and miss an important deadline, or use more of your people’s time than you originally thought, or become irrelevant because your needs change, just to name a few.

Usually those risks are given a passing thought, at most, then dismissed prior to bringing in a consultant. Sometimes you voice a concern internally or to the outside expert.

Risk is Actually an Opportunity

Let’s say you ask the consultant, “How much of our people’s time will this project take?” The eager expert, sensing your worry, will give a vague, comforting reply: “Because we have highly experienced people staffing the project, we can minimize the time required of your personnel.”

Sound familiar? If you ask the right questions, you can actually lower your risk and increase the value of a project. Already, most companies will have an outsider sign a confidentiality agreement before revealing any sensitive information, with the hope that it will prevent that information from being leaked.

Other Risks are Embedded in Your Contracts

Whether you address the risks explicitly or never even think of them, one way or another they are embedded in your contract with the outside expert. Usually they are tied into your agreement through omission, rather than commission. In other words, they aren’t mentioned or discussed at all.

To a large degree, that’s fine. Negotiating and drawing up contracts would become totally unwieldy if you strived to address every possible risk explicitly. However, huge amounts of value are left on the table because important risks are not appropriately managed.

To Reduce Your Risk, Answer These Five Questions:

  1. What risks are important to consider on this project?
  2. What are the sources of those risks?
  3. How can those risks be mitigated?
    1. How can the likelihood be reduced?
    2. How can the impact be reduced?
  4. What is the value of increasing or decreasing the risk?
  5. How can we allocate the risks between us and the outside expert to create the most value?

I’ll discuss how to answer these questions in future posts.