Section Summary – Communicating Project Risks

In the previous few chapters in this section we learnt about project risk communication process. Let us now quickly summarize what we have learnt so far.

• After we identify risks, the next logical step is to communicate those identified risks to all stakeholders and this is the purpose of this communicate project risks process
• Though project communications management is not directly a part of project risk management knowledge area, communicating risks and regular updates to all key stakeholders is an integral part of risk management
• Psychological factors can influence peoples attitude towards risk which in turn can affect their risk tolerance
• Peoples risk attitudes can be broadly classified into 4: Risk Averse, Risk Tolerant, Risk Neutral and Risk Seeking
• People usually resist change (risks) when it threatens their level of comfort or control or if they are unfamiliar with the change
• Risk Tolerance is defined as the degree, amount or volume of risk an individual or organization will withstand
• The Stakeholder Register and Stakeholder Management Strategy can help us greatly in managing stakeholder expectations in terms of risk communications
• We cannot please or satisfy all stakeholders. So, a smart manager will classify stakeholders and identify the high influence/power category and keep them satisfied as much as possible
• Most stakeholders will require only high level information
• The information that we share with different categories of stakeholders will depend on their interest in the project, influence on the project and a variety of other factors. Simply put “Not everyone wants everything”
• Risk Management Plan usually contains templates and reporting formats that we must use for the different categories of stakeholders

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Communicating Risks to Stakeholders

So far, in the previous chapters, we learnt about risk attitudes and have analyzed the stakeholder risk tolerance. So, the next thing for us to do is “Start communicating” to keep our stakeholders informed of the project progress in terms of risk management.

The PMBOK guide defines a separate process that covers the topic of Managing Stakeholder Expectations. This topic was covered in our PMP prep series in a chapter with the same title Managing Stakeholder Expectations. If you check this process, you will see that the Communications Management Plan which is the output of the Planning Project Communication process is an input. This communications management plan is going to define how we are going to communicate with all our stakeholders.

If you are wondering how, then maybe you forgot about the contents of the communications management plan. I suggest you go back to the chapter on Planning Project Communication and revise the contents of the same. The communication management plan contains stakeholder communication requirements which we will be using along with the Stakeholder Management Strategy to effectively communicate about our project risks.

Most stakeholders will require only high level information regarding risks. They will be typically looking for information like:

a. How accurate the presented information is?
b. Whether there is a potential for gain or loss?
c. Can the risk be managed?
d. What are the recommended responses?
e. What is the impact?
f. Etc.

Along with the above mentioned information you must also be able to provide certain additional information like:

a. Who holds the responsibility for the risk and the related events if the risk were to occur?
b. How often will the risk event occur?
c. What alternates do we have?
d. Etc.

But, as with every communication, there is a problem here. Not everyone wants everything. This is where the Stakeholder Management Strategy and the Communications Management Plan come to our rescue. In these documents we contain details like “Who needs what information” and using that we can try to cater to the varying needs of the different stakeholders in our project.

One last thing about communicating project risks is that, the Risk Management Plan usually contains templates and reporting formats that we must use for the different categories of stakeholders. So, we need to take that into account and ensure that the right reports are sent to the right target audience.

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Next: Section Summary

Overview of Communicating Project Risks

In the previous section we covered the “Risk Identification” process in our Risk Management Framework. So, you have identified all the risks that can impact your project. What would you do next?

Take a moment and think logically before you read on…

After we identify all possible risks that may affect our project, the next logical step would be communicate to all people involved in our project that we have identified risks and here they are. Isn’t it?

This is exactly what we are going to cover in this section which deals with “Communicating Project Risks”.

Do you remember that we spoke about Risk Tolerance in one of our earlier chapters? If a project or organization is tolerant to risks, then they tend to take up high-risk activities whereas if the tolerance is low, only guaranteed outcome activities are taken up. Part of being an effect project manager as well as a risk manager is, understanding the stakeholder risk tolerance and the organizational risk tolerance. Though stakeholder risk tolerance and organizational risk tolerance can have a great deal of impact on your day to day decisions, do you think that your own risk tolerance will not play any part in those decisions? Well, if you thought so, am sorry to say that you are sadly mistaken. No matter how hard we try to concentrate on the stakeholder or organizational risk tolerance, unconsciously we will let our own tolerance levels to influence our decisions at least to a slight level. So, it is important that we gauge our own tolerance levels up front to avoid any surprises…

Trivia:

Analyzing our own risk tolerance is not part of the RMP Exam syllabus and nor is it covered in this blog. It is just something I thought you should know because it plays a decent role in our decisions and is something many people overlook as a non-existent factor.

Factors that Impact Risk Communication

Risk Communication is a fairly complicated topic because there is no set baseline as to what is or is not part of communication. One of the senior managers in my company once told me “The job of a PM is 80% communicating and 20% everything else”. Something that is so critical always has factors that impact it and risk communication is no different. The factors that can impact the communication of risks are:
a. Risk Attitudes and
b. Psychological Factors

Before we can go any further, I want to quickly provide a few pointers about the Communications Management knowledge area.

Though Project Communications Management is not directly part of the Risk Management knowledge area, communicating risks and regular updates to stakeholders is an integral part of risk management. So, it is extremely important that we have a good understanding of the communications management knowledge area. So, I suggest you go through all the topics related to project communications management in the PMBOK at least once before you finish your RMP Exam preparation. You can also revisit the chapters that were focusing on communications management during our series on the PMP Exam preparation. They are:

1. Project Communication
2. Planning Project Communication
3. Project Communications Management as part of Project Initiation
4. Communications Management as part of Project Planning
5. Communications Management During Project Execution
6. Communications Management during Monitoring & Controlling the Project

Armed with all this information, let us now dive into the factors that affect risk communications one by one.

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Risk Communication

In the previous chapter, we took a high-level look at the Risk Management Framework and the four domains in it. The purpose of this chapter is to give you some additional information about the Risk Communication domain of our framework.

The Risk Communication domain will contribute to around 27% of the questions that you will encounter in the exam. So, this we need to understand this domain very well in order to do-well in the exam. To recap the exam objectives of this domain are:

a. Apply Interpersonal Skills
b. Assess Stakeholder Risk Tolerance
c. Document Risk Related Information &
d. Create Regular Status Reports

The objectives are only 4 in number and you might think these are easy but let me remind you that these 4 objectives cover a lot of details. Risk Management is not only about identifying risks. In order to effectively manage risks in your project you need to know a lot about Communication. Imagine that a risk event is about to happen in your Project and you are not in a position to communicate clearly about this risk to all the stakeholders with the relevant information. As a result, you are unable to properly respond to the risk that is about to materialize now. As the Project Manager, you will be held accountable for this problem…

Now I guess you would have gotten a fair idea of how important the Communication aspect of Risk Management is. In order to be able to effectively take-up this activity of Risk Communication, you need to understand a few concepts. They are:

1. Understand Communication Types & Styles
2. Understand Communication Models
3. Understand the Communication Plan
4. Understand Information Distribution Methods

A Good Manager who can effectively handle project risks will also possess the following skills:

1. General Management Skills
2. Good Leadership Skills
3. Able to Interact well with Stakeholders
4. Good/Effective Stakeholder Communication skills
5. Good Presentation skills
6. Good Documentation capabilities

Documentation

Are you wondering why I have taken this “Documentation” capability as a separate section? Actually speaking Documentation is one of the key areas of Risk Communication. Have you heard of this statement before?

Risk Information to the Right People at the Right Time

This is what you need to accomplish as part of this Risk Communication domain. We need to know what information people need and at what level and at what frequency. Information that your developer will understand may sound like Greek and Latin to your Top Management and vice versa. So, as manager you need to effectively understand Stakeholder Communication requirements and ensure that everyone gets what they want and that everyone is in the same page about the overall project.

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