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Friday, April 26, 2013

Workarounds and Reserve Analysis


In the previous chapter, we took a look at two of the tools and techniques used in the monitor and control risks process. In this chapter we are going to cover some more – Workarounds and Reserve Analysis. Though workarounds aren’t listed as a distinct or explicit tool and technique used for this process, we are covering it here because, it is very useful in real life and more importantly it is part of the exam syllabus.

Workarounds

The literal meaning of the word workaround is applicable in project risk parlance as well. In real life, every successful or even failed projects would have tried & implemented multiple workarounds to unexpected risks while the project was being executed.

Definition: An unplanned response to a negative risk that has occurred/materialized

In real life, it is not practically possible to capture or identify all of the risks that may occur in our project. Nor is it possible to identify/spot risk warning signs every time. It is also possible that the status of a risk in the watchlist changed from low to high and you completely missed it. In such cases, the risk can suddenly materialize into reality and affect your project.

The workaround is the project team’s response to these types of risks.

Remember contingency and fallback plans that we covered during the “Plan Risk Responses” process? You may be wondering how different is this workaround from those plans?

The key difference is the fact that – Workarounds are unplanned and utilized on the fly whereas we meticulously plan contingency and fallback plans. Another big difference is that, workarounds are formulated and implemented during the monitor and control phase of the project, while contingency or fallback plans are formulated during the planning phase of the project.

The following are some key characteristics of Workarounds:

• They are unplanned responses to negative risks
• They are the usually used to handle unknown or accepted risks
• Is implemented to deal with the consequence of a risk
• Is similar to the contingency plan, except they are unplanned
• Is used when no other response plan exists for this particular risk
• Typically more costlier than planned responses
• Is part of the monitor and control risks process
• Is part of the monitor and control phase of the project

Trivia:
Are you wondering why a workaround would be costlier than a planned response? The answer is pretty straightforward – when you are implementing a workaround, you are literally in fire-fighting mode. You do not have the liberty of looking for multiple alternatives and choose the best/cheapest. All you are worried about now is to minimize the impact/damage caused by the risk that has suddenly materialized and not so much about cheaper alternatives.

Reserve Analysis

Reserve Analysis is yet another important technique that we use in the monitor and control risks process. As the project execution continues, risks begin to materialize and we start implementing the planned responses. In cases where we haven’t planned a response, we use the contingency reserves. So, as we start using the reserves, it becomes necessary to monitor the usage of the reserves to ensure that we still have enough remaining to handle the other risks that may materialize in future.

Definition of Reserve Analysis: An analytical technique to determine the essential features and relationships of components in the pm plan to establish a reserve for the schedule duration, budget, estimated costs or funds for a project

The main idea here is to compare the amount of reserves remaining with the risks remaining to see if the reserves available will be sufficient to handle the rest of the risks. The reserves we analyze will include schedule, cost and budget reserves.

If the Risk Management team was inefficient in calculating the reserves or if the numbers they calculated were insufficient, the reserve analysis can identify such gaps and help salvage the project.

Trivia:
If you are wondering why we need to do this activity – think of the following scenario. Let us say your contingency reserve was 100k USD and you have utilized 90K so far. There is still 3 months’ worth of project work to be completed. Suddenly today you realize that the license for one of the key software components that you use for your project work has expired and it costs around 5K per 3 licenses. Your team has 12 developers and so you will need 20K to acquire 4 fresh licenses. You go and check your contingency reserve to get the shock of your life – you have only 10K and are 10K short.

If you had done reserve analysis last month, you would’ve realized that your project was running low on reserves.

The idea here is simple – if you do not have sufficient reserves, how will you handle risks if they materialize?

Prev: Risk Reassessment & Risk Audits

Next: Variance & Trend Analysis

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