Operational Risk Management

CHAPTER 17Project Risk Management

CONTEXT

Projects and change are some of the most commonly cited sources of risks in organizations. Beyond the multitude of risks brought by new processes, new technologies, lack of familiarity and resistance to change, we have all experienced projects overrunning and exceeding budget, if not failing completely due to causes such as weak governance, unrealistic deadlines, short‐sighted budgeting, poor synergies, lack of internal skills or team stamina, and conflicted interests.

PRINCE 2 lists the most common causes of project failure (Table 17.1). Each project failure can cost an organization thousands or millions in wasted resources and untapped future revenues. Yet these sums are usually overlooked and not recorded as what they are: severe crystallizations of operational risk.

TABLE 17.1 Common causes of project failures (PRINCE 2)¹

1. Invalid business case.

2. Insufficient attention to quality at the outset and during development.

3. Insufficient definition of the required outcomes, creating confusion.

4. Lack of communication with stakeholders and interested parties.

5. Poor definition or acceptance of roles and responsibilities, resulting in lack of direction.

6. Poor estimation of duration and cost.

7. Inadequate planning and coordination of resources.

8. Insufficient measurables and lack of control over progress.

It is therefore good practice for the risk function to be involved at the start of a project and to ...