Episode 123 – Next-Generation Project Risk Management

Episode #123
Original Air Date: 02.15.2021

36 Minutes

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Our Guest This Episode: Dr. Prasad Kodukula

Many promising projects have been cut short or compromised due to sloppy risk management practices. We don’t want that to happen to you. In this episode, Dr. Prasad Kodukula talks with us about risk response strategies that will help you manage risks most effectively. First, Prasad describes how risk management has evolved, and he clarifies the origin of the term “Next-Generation Project Risk Management,” which he calls “Risk Management 3.0.”

Prasad talks us through six specific tools in Next-Generation Risk Management. Hear about ambiguity risks and emergent risks, as well as how to deal with the unknown unknowns. Other advice he shares is about taking advantage of positive risk opportunities, the integration of cost and schedule risks, and adaptive techniques which involve both iterative and incremental methods. Lastly, hear about five types of risk strategies you can apply to respond to risks that you have identified, analyzed, and prioritized. Prasad also offers advice about communicating risks to upper management.

Dr. Prasad Kodukula has been recognized three times by PMI as “Best of the Best in Project Management” with the 2020 PMI Fellow Award, the 2016 Eric Jenett Project Management Excellence Award, and the 2010 Distinguished Contribution Award. A self-proclaimed Global Ambassador of Project Management, Prasad has spoken on project management, leadership, and innovation in nearly 50 countries, and he has worked with 40 Fortune 100 companies. Currently, Prasad teaches project management at the University of Chicago. He is the author, co-author, or a contributing author of 10 books and more than 50 technical articles, and he holds four patents. We’re honored to have Dr. Kodukula as our guest.

Favorite Quotes from Our Talk:

"We’ve got to break down those silos so that we can communicate more freely, more quickly across different functions because when we are talking about resiliency, we want to make sure that we could put together a cross-functional team very quickly that could work cohesively together."

- Prasad Kodukula

"So I think it’s real important to identify the opportunities, as well, so that we can come up with the plan to take advantage of those." opportunities.

- Prasad Kodukula

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The podcast by project managers for project managers. For project managers who are ready to up their game with risk management, Prasad Kodukula clarifies Next-Generation Project Risk Management and talks us through six specific risk response tools that will help you manage risks more effectively.

Table of Contents

02:03 … Meet Prasad
03:19 … Next Generation Project Risk Management
09:12 … Tool 1: Ambiguity Risks
12:49 … Tool 2: Emergent Risks
14:07 … Dealing with Unknown Unknowns
18:40 … Tool 3: Opportunities
23:07 … Tool 4: Integration of Cost and Schedule Risks
24:34 … Communicating Risks to Upper Management
28:59 … Tool 5: Adaptive Technique – Iterative and Incremental methods
32:02 … Tool 6: Risk Response Strategies
35:14 … Get in Touch with Prasad
35:44 … Closing

Prasad Kodukula:  We’ve got to break down those silos so that we can communicate more freely, more quickly across different functions because when we are talking about resiliency, we want to make sure that we could put together a cross-functional team very quickly that could work cohesively together.

WENDY GROUNDS:  Welcome to Manage This, the podcast by project managers for project managers.  Listeners you can still claim your free PDUs.  The steps to submit a PDU for our podcast, as well as for our InSite courses to PMI, has changed.  Our PDU claim page has been updated with the new instructions.  Make sure not to use the autofill, but type in “Velociteach” and the title when you are submitting your PDUs.  We do apologize for the inconvenience.

I am Wendy Grounds, and with me is Bill Yates. 

Bill, today we’re talking with Prasad Kodukula.  He is a PMI Fellow, a PMI advisor, thought leader, coach, author, and entrepreneur with more than 35 years of experience.

BILL YATES:  Yeah, I think people will quickly figure out Prasad is an overachiever.

WENDY GROUNDS:  Absolutely.

BILL YATES:  He’s taken three big awards with PMI:  the 2010 Distinguished Contribution Award, the 2016 Eric Jenett Project Management Excellence Award, the 2020 PMI Fellow Award.  So this guy is very well decorated.

WENDY GROUNDS:  He is also a self-proclaimed global ambassador of project management.  He’s spoken on project management and innovation leadership in nearly 50 countries, and I enjoy talking to him about South Africa.  He goes there quite often.  Unfortunately, with COVID, he hasn’t been able to get there.

BILL YATES:  Yes.

WENDY GROUNDS:  But we were able to talk a little bit about South Africa, which was really cool.

BILL YATES:  Talk about home.

WENDY GROUNDS:  Yeah.

BILL YATES:  Yeah.  So Prasad is going to talk with us today about one of the topics that’s of keen interest to him and certainly to us.  He’s going to look at risk management and describe six next-generation tools for risk management.

WENDY GROUNDS:  Prasad.  Thank you so much for joining us.

PRASAD KODUKULA:  Hello, Wendy.  Thank you for having me.

Meet Prasad

WENDY GROUNDS:  Prasad, with a Ph.D. in Environmental Engineering, you obviously did not set out in your career intending to become a project manager.  How did you discover that this was the path for you?

PRASAD KODUKULA:  Well, that’s an interesting question.  You are right, Wendy.  I did not start to make a project manager in my career.  And it happens with a lot of people.  It happened to me by accident.  So I call myself an “accidental project manager.”  So I started as an R&D engineer, and within two or three years they asked me to manage projects.  I didn’t know anything about it.  I said sure.  Sounded like a pretty good idea, sounded like a nice title to have, so I became a project manager by sheer accident.

BILL YATES:  That’s hilarious because, you know, you think, okay, here’s Prasad, an accidental project manager, which you’ve won three amazing awards with PMI.  You’re a PMI Fellow, which is really the feather on the top of the cap.  That’s an amazing award.  You’ve achieved so much in this accidental career, so congratulations to you.

PRASAD KODUKULA:  Well, thank you.  It happened by accident.  Maybe the awards are by accident.  I don’t know.

Next-Generation Project Risk Management

WENDY GROUNDS:  We’ve had a number of project managers come on the show, and their story is so similar.  They came upon project management by accident and ended up loving the profession, and they’ve gone on to do great things.  So today we’re talking about next-generation project management.  I think that’s a new term for many people.  Prasad, can you explain what you mean by the term “next-generation project risk management”?

PRASAD KODUKULA:  Next-generation project risk management, yes.  I actually call it Risk Management 3.0.  So let me take a little bit of a liberty here to start with the history of risk management.  And I will try to make it brief.  When I started my career in the corporate world right after grad school back in mid-1980s, that was about 10 years I spent in the corporate world.  And at that time we never really talked about risk management.  We just did the projects focusing on schedule management, cost management, of course making sure that the quality is delivered.  But we never talked about, and we never actually implemented, any kind of risk management plans in those years.  And I call that period Risk Management 0.0.

BILL YATES:  Okay, yeah, right.

PRASAD KODUKULA:  Right?  Then in 1995 I started my own company, Kodukula & Associates – project management consulting, coaching, and training company – and started to work with some of the Fortune 100 companies.  And at that time we started getting into what I now call Risk Management 1.0.  And what that really entailed was putting together what are called “risk registers,” and using what’s known as “qualitative risk management.”  So that’s what some of the more mature companies in the area of project management started to do.  But still there are a lot of organizations that consider risk as a four-letter dirty word.

BILL YATES:  Right, yeah, why invest in it?  It’s not worth it.  If something happens we’ll deal with it then.  Yup.

PRASAD KODUKULA:  Right.  That was the time.  And then we got into the early 2000s and 2010s, Risk Management 2.0.  So what’s Risk Management 2.0?  It’s about quantitative analysis of risks as opposed to qualitative analysis.  So now, moving into 2020s and now beyond, I call it Risk Management 3.0.  So of course we’re going to continue, and we’re going to start using more and more of quantitative analysis because the tools that you need for quantitative analysis are becoming real easy now.  They’re available, and we’ve got fast computers.  So we could do things like what we call “simulations” and so forth.  So it’s relatively easy.  That’s quantitative analysis.

And one more thing that we are getting into is not just considering threats, meaning risk events with negative impact.  We also should be considering events with a positive impact.  We call them of course “opportunities.”  And we talk about positive risks and negative risks.  Positive risks are opportunities, so we are starting to consider the opportunities more and more.  And then another feature I would say of Risk Management 3.0, the next-generation’s management, is we want to look at the projects in the context of a portfolio.  So that’s sort of looking at not only project risks per se, but also risks related to portfolio, which consists of, of course, a group of these projects.  So those are some of the features, if you will, of what I call Risk Management 3.0.  And there are many other nuances that we could get into.

BILL YATES:  Yeah.  That resonates with me, and really this history is perfect.  The one that you just described is spot-on.  That is my experience, too.  It’s like at one point in our careers we started going, oh, you know what, it’s a good idea if we write down these risks.  Let’s get everybody in a room and come up with a risk register, you know, what PMI refers to as a “risk register.”  A lot of people call it a “risk log” or “risk list,” although it’s kind of hard to say.  But it’s a spreadsheet, or it’s something in software.

And it’s great because then many of the projects that I was doing were software with utilities there were a lot of similarities.  So I could start with my list of risks from the past projects, and it’s like every project I got smarter and smarter because I could start with my history; right?  I could look back and go, hey, here’s some risks that we had with past projects.  Let’s be sure we talk about this with our customer.  Make sure we cover this with IT.  It was incredibly helpful.

So I’m with you.  1.0 was there.  The qualitative tools started getting better and better.  If you were like me at first, you know, I can remember having conversations with team members and say, “Hey, what’s the likelihood that this event’s going to occur?”  They’d look at me like I’m asking them, you know, to predict the next hurricane or something.  Like, “I don’t know.  What do you mean?”  So we got better and better with our tools, coming up with qualitative assessments.

And then we started to put it on steroids with quantitative analysis.  Then we said, okay, now we have the computing power.  We have the ability to do simulations, Monte Carlo analysis, et cetera, just on our laptop that we used to never even imagine being able to do. 

So for somebody who’s just starting out today and doing risk analysis, it’s like 20 years ago you could not have done what you’re doing now.  You’re just kind of taking it for granted.  “Well, I just go into this spreadsheet and click on this tool, and it simulates it for me.  What’s the big deal?”  You know.

PRASAD KODUKULA:  It’s so easy to do these days, yes.

Tool 1: Ambiguity Risks

BILL YATES:  Yeah, yeah.  So that’s great.  You know, part of the fun for me in having this conversation with you today is you’ve taken this to 3.0.  You’ve taken this to another level, and there are six specific tools that you talk about in next-generation risk management.  So we just wanted to walk through those.  We thought that would be a great benefit to project managers who are ready to up their game with risk management.

So the first one, you start out with this big word, “ambiguity,” ambiguity risks.  So talk to me about this first tool.

PRASAD KODUKULA:  It really boils down to two important things.  You were saying earlier that you worked in software; right?  So you know in software how requirements evolve. 

BILL YATES:  Yes.

PRASAD KODUKULA:  How they keep changing, so there is ambiguity related to requirements.  There is ambiguity related to scope of work.  So that’s one type of ambiguity, and another type of ambiguity is technical ambiguity.  It’s about not knowing whether or not your new technology is going to work, so that’s technical ambiguity.  So the question here becomes, all right, if we know that our project has scope, how do we manage the project?  How do we deal with the risk associated with this ambiguity?  And similarly, if you have technical ambiguity, how do you manage the project?  So you have to use a different model, if you will.

For example, say I have another company.  I cofounded this company a few years ago.  It’s called NeoChloris.  And what we do is it’s a bioprocess technology company.  We deal with sustainable technologies, we have several innovations, and we hold patents.  We have proprietary processes and so forth.  So when we come up with a new idea, a new process, new technology, we obviously don’t know if it’s going to be effective or not. 

So how do you structure your project?  We go through, for example, proof of concept to begin with, and then we do a lab experiment.  And then we do a pilot scale study.  And then we do an onsite demonstration-type study.  Then we go into commercialization.  So you go through the steps because this is the way that you’re going to have to deal with a project that has ambiguity.  You cannot have a project plan, like soup to nuts, on day one.

BILL YATES:  Right, right.  I love the idea of the proof of concept and just building a small prototype of what you think is going to work.  I know in my experience that elicits or brings about the best feedback from customers is when I can actually put something in their hands and say, okay, here’s the new report that I think you’ve described that you want from me.  Or here’s the new feature on this product that I think I understand it right.  Can you look at it, play with it, spend a couple of days, and give me some feedback? 

When they have something in their hands, that’s when clarity starts to come about.  Which, you know, is just the opposite of ambiguity; right?  So then you start to see that clarity.  With the company as you’ve described, is that some of the output that you guys have seen from proof of concepts as you’ve used them?

PRASAD KODUKULA:  Oh, absolutely.  We start with proof of concept.  That’s basically, at least in our industry and the kinds of project that we deal with, it’s looking at the theoretical aspect and say, hey, is this going to work based on theory.  And if we think that, yeah, it makes sense, it’s going to work, then we go to the next level, prototyping.  Maybe we do a little prototype in a lab.  And then if that works, then we go to the next level, and so on and so forth.

Tool 2: Emergent Risks

BILL YATES:  Very good.  Okay.  There’s a second tool set that you talk about related to emergent risks.  Talk to us a bit about that.

PRASAD KODUKULA:  How much at risk is all about what people now call “unknown unknowns.”  You must have heard about unknown unknowns, Bill.  Right?  Unknown unknowns, basically these are risks that you cannot foresee.  These are the things that are evident only in hindsight, on retrospect, after they have happened.  The classic example, of course, is the pandemic.  A lot of people would say this is an unknown unknown.  And so these are the risks that you cannot put on the risk register because, if you can put them on the risk register, that becomes a known unknown, if you understand what I mean.  Right?

BILL YATES:  Yes.

PRASAD KODUKULA:  It’s not an unknown unknown.  So a pandemic is a classic example.  Tsunamis.  Another example of an unknown unknown is a tsunami.  And Bill, Wendy you must have heard of course of the Japanese tsunami back in 2011.  That was an unknown unknown, and it caused so much disruption.  Most importantly, many, many people lost their lives.  So these are some examples of unknown unknowns.

Dealing with Unknown Unknowns

BILL YATES:  For some project managers, just looking at it and going, okay, wait a minute, how can I be responsible for this?  How should I plan to deal with them?  I can’t put them in a risk register because I don’t know what they are.  So how do we deal with unknown unknowns?

PRASAD KODUKULA:  Yeah, this is the question that a lot of people are struggling with these days, of course especially because of the pandemic that we are in.  The simple but very difficult answer to that question, Bill, is building a resilient project team.  That is the answer to that question.  So you may come back and say, well, how do we go about building such resilient organizations?  And I would say there are three things that we could do.

First and foremost, we need effective leadership at the top of the organization or of the projects.  So when we talk about effective leadership at the top of the organization or the project level, we’re talking about being able to swiftly change the strategy.  How can we quickly change the strategy so that we can get our feet back on the ground and get going?

And the second thing that we need to do is we have to create an organization or a project team where we don’t have a lot of these communication barriers.  We’ve got to break down those silos so that we can communicate more freely, more quickly across different functions because when we are talking about  resiliency, we want to make sure that we could put together a cross-functional team very quickly that could work cohesively together.

And the third thing that we need to do is we have to empower these teams.  We have to make these teams independent, give them the tools that they need, and then we’ve got to get them to focus on this problem alone.  We can’t have them work on bunch of different things and whole list of projects.  One project.  This is it.  And that’s what we’ve got to do.  Build Agile teams.  That’s what we’ve got to do so that we have this resiliency.  Actually, a great example is, you know this company Airbnb.  It’s an online marketplace for vacation rentals; right?

BILL YATES:  Sure, absolutely, yeah, yeah.

PRASAD KODUKULA:  It was at the brink of collapse in May, last May of course, because of the pandemic.  But then the chief executive, Brian Chesky, noticed that there’s something interesting happening.  You see, at Airbnb, if you look at what their customers were doing pre-pandemic, they were of course looking for rental places at fancy locations perhaps in big cities and what have you.  But now because of the pandemic they don’t want to travel.  They don’t want to get on the plane.  They don’t want to stay in hotels.

So they started looking at places that are close by.  So what did the chief executive do?  He said, “We’ve got to have a different strategy.”  And then what he did was he decided to have his teams change their algorithms completely on the website and the app so that the prospective clients would find places that are really close by, whether it is, let us say a cabin or a beachfront property or whatever.  Very quickly they shifted the strategy.  They built the teams, they focused on this, they killed a whole bunch of other projects.

And guess what happened?  Within just less than two months they were back in business.  So what is the upswing of this?  They reported third quarter profits, and then of course as I’m sure you both know, just less than a couple of weeks ago they did a gangbuster IPO.  And this is something that the chief executive Chesky said that resonated with me.  In dealing with these types of unknown unknowns, he said, “I didn’t know I would make 10 years’ worth of decisions in 10 weeks.”

BILL YATES:  That’s perfect.

PRASAD KODUKULA:  That’s resiliency.

BILL YATES:  That is.  That’s a perfect example, Prasad.  That is so good.  I do remember those days of thinking about Vrbo, Airbnb, what are they going to do, you know, now that the COVID pandemic has set in.  And what a great job they did of such resiliency.

And that hits on your three points.  There’s leadership.  They broke down the communication barriers.  And they empowered their teams and focused on the issue at hand.

Tool 3: Opportunities

 Well I think I’d like to shift to the third tool.  And this is a bit of a mind shift, I think, for project managers to think about risk this way.  And I really appreciate you bringing this up.  It’s opportunities.  Risk means uncertainty.  There’s a negative side to that, which is where I usually go.  And I think most project managers go there first.  It’s like, oh, my gosh, what terrible things could happen to my project?  But then there’s the opportunity.  Sometimes I’m so focused on the negatives that I forget to think about being prepared for those positive risks that occur.  So talk to us about opportunities.

PRASAD KODUKULA:  Yeah, that’s an excellent question you brought up about opportunities.  This is something that most teams do not consider, in my experience.  I will give you a couple of examples, a recent example as a matter of fact.  I was working with this biomedical device manufacturing company, and the PMO director and his team were sitting at the table, and I was there, and then on one of their projects they put in three iterations for their prototype.  In other words, you build a prototype first, and then you test it, and you get the results, and then you tweak it.  And you go to a second iteration, and then third iteration, and then you finalize the design.  And then you’re going to, let’s say, full scale.

I asked them, “Do you always use three iterations?”  And the team said, “Yeah, I mean, this is just the SOP, Standard Operating Procedure.”  I said, “Why not two?”  And then the PMO director said, “Yeah, why not two?  Why aren’t we looking at only two iterations instead?”  And that’s an opportunity; right?

BILL YATES:  Yup.

PRASAD KODUKULA:  So what if we said to the team, look, this is an opportunity that we could do it within two iterations.  Right?  So when you put it on your risk register, then you’re going to leverage that opportunity in some fashion.  I’ll give you another example in the pharmaceutical business because I work with Big Pharma.  And sometimes they get the FDA approval faster.  Believe it or not, I mean, you would think, government acting faster?

BILL YATES:  How can this be?  Right.

PRASAD KODUKULA:  How could this be?  But it does happen.  So what if you get the FDA approval faster than you expected?  So the question here is, are you ready to move forward, especially when this is on critical path?  It always is on critical path, by the way, getting the approval from the government.  Are you ready for the next step?  So one executive actually told me about this not too long ago.  In one case they got the approval faster than they expected.  But they could not move forward in terms of sales and marketing because the teams were already committed.

So here is the point.  If you identified that opportunity, your team would have made some contingency plans; right?  If the approval had taken place earlier, we would have been ready with our contingency plan, and we could have gone to market.  So I think it’s real important to identify the opportunities, as well, so that we can come up with the plan to take advantage of those opportunities.  Otherwise you know what happens.  This PMO director said this.  He said, “Hey, look, guys.  If you’re only looking at threats, my project budget is going to just skyrocket.  You’re going to ask more and more money.  And you’re not really taking advantage of any opportunities.”

BILL YATES:  That’s fair.

PRASAD KODUKULA:  So does it make sense?

BILL YATES:  Yes, absolutely.  I mean, it’s naturally where we go is the negative.  And there’s nothing wrong with that.  Those are good things to do. But if I’ve got an hour set aside for discussing risks, and I spend 55 minutes talking about negatives, that doesn’t leave much time for those positives.  And you’ve given great examples of true opportunity cost.  You know, we couldn’t get to market on time or as early as possible because we had not done our proper risk assessment on these positives, these opportunities.

PRASAD KODUKULA:  Yeah.  When the opportunity came about, you were not ready.

BILL YATES:  Yeah, you’re not ready.  And sometimes it’s as simple as, if I’d just described this to the marketing group, or had just given a heads up to this other department and said, hey, there is a possibility I’m going to give you this Friday instead of a week from Friday, so are you guys ready if?  Oh, boy, if you’d told me that earlier, then yeah, we could have done something.  But now it’s too late.  So that’s a good reminder.

Tool 4: Integration of Cost and Schedule Risks

One of the tools that you talk about in this “Six Next-Generation Risk Management Tools” is the word “integration,” integration of cost and schedule risks.  Talk about that further, Prasad.

PRASAD KODUKULA:  Yeah.  That is really about quantitative risk analysis.  So let me try to explain it without getting into too much of a detail.  We all know that if a project is going to take longer, it’s going to cost more.  Let’s face it.  If it takes more days, it’s going to cost us more, whether it is in terms of actual dollars, green dollars, or as we call blue dollars.  You know the difference.  The blue dollars is the labor put into projects; right?  So it’s going to cost us.  The more time it takes, the more costly it’s going to be, if you will.

So now how do you integrate that?  So through simulations we could integrate the impact of schedule on project cost.  And then earlier we talked a little bit about simulations.  So now that we have so much computing power, even as you were saying, Bill, we could do a lot of this on our laptops, which we were not able to do 20 years ago.  We needed mainframes in those days to do something like this.  Right?

BILL YATES:  Go to NASA; right.

PRASAD KODUKULA:  Yeah.  So we could do the integration of schedule and cost risks using the simulations with the help of the tools and the fast computing power that we have today.

Communicating Risks to upper Management

BILL YATES:  That’s good.  You’ve brought up a topic that brings me to a question I really wanted to ask you.  As a project manager you’re talking with upper management, and you want to communicate risks to them, sometimes I would make the mistake of going in with all the science and the math that went behind our prediction, or how we came up with it, this justification.  And I would just see the eyes glaze over.  I’d see them looking at their watch or thinking, okay, what’s next. You know, just cut to the chase, Bill.  So I’ve made those mistakes before.  What advice do you have for communicating risks to upper management?

PRASAD KODUKULA:  Well, I would say there are three things that we could do in terms of having better communications with our upper management.  First and foremost, we need to let them know that risk has a cost.  What does it mean, risk has a cost?  If we were to do something about the risk, in other words, if we were to mitigate the risk, for example, it’s going to cost us.  Which means we need more money.  Exactly.  We need a bigger budget.  So they need to know that.

And we should in that context also communicate to them that there is something, what I call “risk debt.”  What that is, is if we address the risk today, for example, it may cost you only $1.  But if we don’t take care of it today, and if we address it in the next phase of the project, it’s going to cost us 10 times more.  That’s my rule.  Right?  And then if you don’t do it then, you address it in the subsequent phases, it’s going to cost 10 times more. 

In other words, from the initiation phase, let’s take a look.  It would cost $1 to address the risk.  You don’t do it.  You do it in the planning phase.  That’s going to cost you $10.  And you don’t do it in the planning phase, in the implementation phase you address the risk in some fashion.  That’s going to cost you $100.

And then if you find out, oh, yeah, we still have the risk remaining, just before you are closing out the project, and if you address it at that time, it’s going to be, well, you know, apply the 10 times principle.  And then, by the way, if you don’t take care of the risk during the project lifetime or during the project lifecycle rather, you get the product out, and then there’s a problem.  That costs you 10 times more.  So it’s a 10x rule.  And then what do we mean by “debt”?  The debt starts increasing.  And that’s a cost.  So let’s go ahead and address the risk as early as possible.  So that’s number one, communicating the risks to your upper management.

And the second thing we need to do is communicate with them how you plan to manage risks.  These are the risks that we have identified.  Of course earlier, Bill, you mentioned about risk registers, logs, and so on and so forth.  We identify the risks, and then we are going to do something about them.  Either we mitigate them or we transfer the risk or we avoid whatever.  We want to show to senior managers this is what we plan to do, or this is what we have done.  This is why it costs us more.  That’s number two.

Number three, going back to the unknown unknowns, let’s make sure that they are aware of unknown unknowns, and this is a thing that we can’t do anything about, and there are also risks that may have very, very low probability, but if they happen, they have extremely high impact.  There’s nothing we can do on our projects because, if we were to deal with those risks, it’s going to cost us an enormous amount.  So therefore we want to escalate these kinds of risks to the upper management.  We want to let them know.  So those are the three things that I would consider when communicating risks to our upper management.

BILL YATES:  That’s outstanding.  I think for upper management to know, okay, there’s a strategy in place.  Yes, risk has a cost.  There’s a strategy in place that the team has, and they’re going to let me know if there are things that need to be escalated to me.  And they’re going to follow the plan for those below that escalation threshold.  As an upper manager, I think that would give me a lot of security and peace and a sense of, okay, they’ve got their game together.  They know what they’re doing.  And it’s great advice.  I think for project managers listening to this, those are three nuggets just to take away.  Thank you for sharing that advice.  Outstanding.

PRASAD KODUKULA:  Oh, absolutely, yeah.

Tool 5: Adaptive techniques, Iterative and Incremental Methods

WENDY GROUNDS:  So we’re at number five of your risk management tools, Prasad.  This one is about adaptive techniques which involve both iterative and incremental methods.  Can you explain that tool to us?

PRASAD KODUKULA:  Yeah, that’s right, Wendy.  Adaptive techniques involve incremental and iterative approaches.  As far as iterative approaches, we touched on those kinds of approaches earlier, remember, when we talked about prototyping and so on.  That’s iterative approach.  You build a prototype, and then you test it, and then you tweak it, and then you test it and so forth.  That’s an iterative technique.  What about incremental?  Think about a major rollout of an ERP system.  So in old, old days we used to use this so-called “big bang” approach.  I mean, we don’t do that much anymore, you know.  I mean, we have learned our lessons.

So a better technique is to do it incrementally, do it little by little.  Just try it out with one particular department, one particular function.  Or try it out in one particular region.  And then see how it worked.  What are the lessons we could learn from this?  And then you take it to the next level.  So you do it by increments.  So the idea here is that let’s make sure that we design our project plans in such a way that most suit our projects.  In other words, let’s make sure that we use the adaptive techniques like incremental and iterative approaches when there is ambiguity.

BILL YATES:  Prasad, that is perfect.  And I think of, even in the restaurant industry, I think of franchise restaurants and how they’ll talk about changing something on a menu, or something in the back kitchen, a new fryer or a new technique.  And they may have a thousand restaurants across the globe, and they’ll pick a region, just to your point, and they’ll start there.  There’s ambiguity.  There’s, okay, when we make this change, we think it’s really clear based on our focus groups and the surveying and everything, and the customer studies we’ve done.  But we need to put it out there in the wild and see.  So let’s pick 50 restaurants, and let’s implement the change, and let’s learn from it.  Let’s tweak it and then roll it out to another 50.  Absolutely right.  That’s a great way to take on risks.

PRASAD KODUKULA:  Oh, by the way, these iterative and incremental techniques you may argue have been around for a long time.  I’m an old-timer; right?  So we use the incremental and iterative approaches way back.  But what’s the difference, you may ask?  Why is this a new-generation approach?  And the difference here is we are using these approaches, these techniques, in the overall context of project management, looking at what kind of projects are we dealing with and what lifecycle model and what tools would fit best.  So that’s what makes it the part of what I’m calling New Generation or Next Generation 3.0 approach.

Tool 6: Risk Response Strategies

BILL YATES:  Now, the sixth tool on our list has to do with risk response strategies.  Talk to us a bit about that.

PRASAD KODUKULA:  Well, at the end of the day, let’s face it.  You could do identification of risk.  You can do qualitative analysis, quantitative analysis, so on and so forth.  But what do you want to do it for now?  Well, you have to; right?  You have to come up with a response action.  So what kind of strategies can you apply to respond to these risks that you have identified, analyzed, prioritized and so on, so forth.

Typically we talk about five different types of strategies.  For example, let’s start with accepting, that is, simply accepting  the risk and say, well, you know what, we understand that there’s a risk.  But then there’s maybe low probability of this happening, or maybe the impact is low.  So we accept it, and we are not going to do anything about it.  And the second strategy is about mitigation.  What’s mitigation?  You can minimize the probability of the risk happening, or you could minimize the impact by taking some proactive measures upfront.  Third strategy could be transfer the risk to some other party.

And then one more strategy, number four, is avoid it altogether.  What is the root cause of this risk, the threat?  And then how could we avoid it altogether?  And then of course we talked about escalation already.  It’s the fifth strategy.  That is, we as a project team are not going to do anything about the risk, but then we are going to escalate it.  We’re going to inform the  upper management about it so that they can put it on their risk register.

BILL YATES:  Yeah, it’s on their plate now.

PRASAD KODUKULA:  Yeah, it’s on their plate, yeah.  You remember, in old days we used to say, “Who is carrying the monkey?”  You know, take the monkey off my shoulder and put it on yours.

BILL YATES:  Yeah.  So it’s appropriate to end with that tool because you’re absolutely right.  All the identification, the brainstorming, the analysis, it doesn’t mean anything if I’ve not then set up a plan and a strategy for what am I going to do when this risk event occurs.  So that’s an appropriate way for us to wrap up these six tools.

Prasad, thank you so much for walking through these with us.  And given the perspective that you did, even the example of the way we used to roll out ERP implementations just cracks me up.  Man, I can remember being at companies when they are biting off that elephant, and they’re trying to swallow the thing.  And every department’s being impacted by a new ERP in the same time.  It was like, okay, disaster.  All right, we’ve learned from this.  We need to do things better.  So, yeah, taking that mindset to risk management within our projects, it’s perfect.

PRASAD KODUKULA:  Thank you for giving me this opportunity to share with you and with your audience some of my experience, some of my thoughts, some of my stories and what have you.

BILL YATES:  We deeply appreciate it.  Risk management is an area that, for me as a practitioner, I always felt like I could get better at.  So for all of us, I think to be challenged and inspired by the tools that you’ve shared is perfect.  So thank you for sharing that with us, and thank you for your time.

Get in Touch with Prasad

WENDY GROUNDS:  And lastly, Prasad, how can our listeners hear more about your work?  And if they want to reach out to you, what’s the best way for them to do that?

PRASAD KODUKULA:  Well, first of all I’m on LinkedIn.  You could just look up my name, Prasad Kodukula, and of course you would find me.  And then my company has a Facebook page.  Kodukula & Associates is the name of my company.  We have a Facebook page.  And then also of course my company’s website, Kodukula.com.

Email: prasad@kodukula.com
LinkedIn: Prasad Kodukula
www.kodukula.com
www.facebook.com/KodukulaAndAssociates

Closing

WENDY GROUNDS:  Listeners, you’ve just earned some Professional Development Units by listening to this podcast.  To claim your free PDUs, go to Velociteach.com and choose Manage This Podcast from the top of the page.  Click the button that says Claim PDUs and click through the steps.

Thank you for joining us.  Until next time, keep calm and Manage This.

5 responses to “Episode 123 – Next-Generation Project Risk Management”

  1. Avatar Connie Plowman says:

    I enjoyed this podcast from 3 of my favorite people — Prasad, Bill, Wendy. Prasad — Thank you for sharing your accidental PM career (like most of us have traveled), for learning more about Risk Management 3.0, and for outlining 6 specific risk management tools. Love your examples and advice for communicating risks. Thanks for sharing!

  2. Thank you, Connie. I’m glad you enjoyed the podcast. It was fun working with Bill and Wendy.

  3. Avatar Gururaj Hebbar says:

    Thanks, excellent

  4. Avatar Catharine Vasile says:

    Excellent podcast – learned a lot!
    thank you

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