Project Failure Risk: Mitigation and Control Strategies

Projects fail. They fail all the time. We accept their failures and we accept the failure rate as part of business. Per the Standish Group’s CHAOS report, only about 30% of projects 2011-2015 were completed on time and on budget, over 50% were  outright cancelled. What does this mean? An overwhelming majority of projects do not achieve their intended goals.

While most projects are completed, there’s a 50:50 chance that it won’t be completed as originally planned.

For many organizations, shifting costs and deliverable timelines have become acceptable and projects can still be considered a success if the end deliverable is achieved, regardless of how long it took or how much it cost. Still, there are many reasons why projects fail, and the reasons are typically very complex. While project failure risk can never be fully accounted for, it can be mitigated and controlled throughout each stage of the project.

Project Failure Risk Throughout the Process

Research from the Project Management Institute (PMI) uncovers that most projects go through five stages, including Initiating, Planning, Executing, Monitoring & Controlling, and Closing.

While project failure risk is present in every stage, the likelihood of project failure derives mostly from the Initiating and Planning stages.

Issues in these first two stages impact the entire life of a project and can lead to failure down the road. This is not to say that all failure risks result only from these two stages, as risk can present itself at any point, but rather that most failure risks can be tied back to the first two stages.

As project managers goal is to guide a project through all five stages with the appropriate stakeholders and manage the processes to execute and deliver on the project. Risk analysis and accounting is therefore a key component to project management. By taking more time during the Initiating and Planning stages, they can better understand risks throughout the lifecycle and mitigate them before they become a critical project failure risk.

The final stage, Closing, is the least risky, but the risk of project failure is still present.

Most failure risk in the Closing stage is tied to earlier unaccounted-for issues that do not present themselves until the very end. For example, if you’re ready to send the project to key stakeholders for acceptance (i.e. close it out) but did not complete a formal scope or acceptance requirements review, then it’s possible that you won’t be able to successfully close off the project.

Risk Mitigation, Control, and Acknowledgement

There are many risk assessment strategies that organizations can implement to impact risk and overall project success. Depending on the level of risk, a company may consider one of the three following approaches:

  1. Mitigation: Understand the risk and deploy strategies to eliminate its occurance. Mitigation strategies are ultimately focused on ensuring the risk does not materialize throughout the project.
  2. Controlling: Understand the risk, allow the potential for it to come up, and control the direction of the risk. Controlling strategies focus less on removing risk and more on changing the impact of the risk. This means that the risk may still arise but its impact will be lesser felt or can be controlled into a positive risk.
  3. Acknowledgement: Usually reserved for the lowest impact risks, acknowledgement strategies focus on understanding the risk and not deploying any unique strategies to account for the risk. Acknowledgement should only be used where the impact of a risk on a project is minimal.

Ultimately, accounting for risk has a significant impact on the outcome of a project. How a risk is accounted for is dependent on the project, the organization, and the risk’s potential impact. Regardless, risks need to be accounted for prior to engaging a project.

Early-Stage Risk Analysis to Improve Success

As two areas that present the most risk to a project, the Initiating and Planning stages should receive more focus than they currently do. In many organizations that lack a formal project management office or standardized processes, these stages often are overlooked or minimized in favour of more resource- and cost-intensive Executing and Monitoring stages.

Poor planning, however, can have one of the biggest impacts on failure throughout the life of the project.

Organizations should spend more time on initiation and planning to ensure project risks are properly accounted for. While many failure risks are project-specific, there are some general areas that businesses should consider when they’re initiating and planning a project:

  1. What resources are required to successfully deliver the project?
  2. Is the project timeline reasonable? Do stakeholders have full access to all resources required to complete the project?
  3. Are the project deliverables well understood and fully agreed to by all stakeholders? Is additional clarification on project requirements needed?
  4. Does the company have experience in this type of project? What challenges have been encountered previously? What was the outcome of those projects?
  5. What contingencies should be accounted for? Are these reflected in the project budget?
  6. How defined does the work breakdown need to be? Do all project team members have the necessary experience/expertise to deliver?
  7. Are there competing projects that may demand some shared resources? What is this project’s priority level in relation to other projects on the go?
  8. Are there systems and processes in place to manage the project effectively?

Looking at some or all these questions will help an organization understand potential risks. Risk analysis occurs throughout a project lifecycle, but is most critical in the first stages to ensure the team and organization have a good understanding of the project and are aware of what could go wrong.

Controlling for Unforeseen Risk

Unforeseen risks are, by definition, risks that we didn’t see coming. These risks are things that can still negatively impact the project. Depending on the level of impact, they could ultimately lead to the failure of a project. It’s important to account for and control these risks as much as possible.

If it’s unforeseen, it’s more difficult to control for the risk directly. You can account for and control some of this risk by implementing stronger project management processes.

Most mitigation strategies revolving around unforeseen risk centre on historical risk analysis. After a project completes, the team should conduct a thorough de-brief and document unforeseen risks that came up. This can be collected into a project resource library and reviewed during the Planning stage.

Contingencies in budget, schedule, and resources should also be considered and included in a project at a reasonable and organizationally appropriate level. That is, you should include reasonable contingencies that reflect the project scope/complexity and organizational priority.

The amount of focus put on unforeseen risks varies but is mostly informed by the potential impact of a risk on project outcome and the likelihood that it will arise.

At the end of the day, unforeseen things will always happen, but they do not need to lead to the failure of a project. Controlling for the unforeseen should focus on the highest potential impacts and acknowledge lower impact risks.

Strategic Project Management Starts with Effective Planning

While most organizations don’t have (and might not need) a full Project Management Office or robust project management processes, incorporating basic planning and risk analysis strategies will help increase the likelihood of project success. Most of the tips and suggestions offered here can be easily implemented by any organization and can have a positive impact on a project’s outcome.

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Rob holds a Ph.D. in Political Science from Western University, and has published articles in international journals as well as given presentations throughout Canada and Portugal. His area of expertise lies in advanced manufacturing, international development, export market development, and automotive manufacturing. As a Program Manager at Mentor Works, Rob works with business owners to obtain funding to meet their growth strategies. Prior to joining Mentor Works, Rob worked extensively in various academic roles, software and ICT sales and development roles, and in quality control roles in the automotive industry.

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