The main problem in planning new projects is completely ignoring the unknown, when employees simply do not assess the risks and their consequences in any way, or they simply take some average values (for example, the average delivery delay time and apply them to the assessment of project schedule). At the same time, sometimes, such assessments, at the suggestion of the management and the owners, are carried out extremely optimistically, very often taking into account personal interest of responsible employee in their approval and subsequent implementation.
Some may respond that they, as a rule, implement projects faster and cheaper than originally planned. Here we come to another common tool, which is to reserve additional resources for the implementation of projects. Some people have a golden rule to multiply everything by two or one and a half within the framework of planning (budgets, deadlines, the need for people and other resources). However, this is not effective planning (when we are trying to model and realize the future), but ordinary reservation. It can cause unpleasant consequences for the organization, such as overpayments for the use of borrowed funds, misuse of excess reserves, increased actual terms and costs, understatement and actual deterioration of planned financial indicators.
To solve the above problems, you can use the most effective and modern tool - quantitative risk assessment and simulation. It allows to estimate with a high degree of reliability the required volumes of resources and terms (volumes of costs and reserves), incl. the impact of individual risks and uncertainties, their cumulative impact on the project main KPIs achievement (including finance and timing).
As a rule, resistance against conducting a quantitative assessment of project risks is based on arguments such as: we do not have enough data to assess, too many factors can affect the achievement of goals and deadlines, each project is unique and inimitable, we are not able to foresee everything, these assessments are too a lot of subjective opinion and bias... and therefore we are better off relying on our experience and solving problems as they arise, rather than engage in meaningless planning...
However, all of these arguments are shattered about the positive results of effective forecasting / modeling and risk management. Since we will be able to see the real picture and the possible ranges of the project movement, objectively assess the necessary reserves and understand the boundaries of the possible project goals achievement and likelihood of achievement. Already on the basis of a well-developed project, we will be able to make a balanced, well-grounded managerial decision about whether to join such a project or not. In the next article, we'll take a closer look at modeling and project risk management tools.
If you are interested in implementing risk management systems in your company, then I will be happy to help in such projects implementation. Please contact me through my website: http://akonnov.ru/ or through my Telegram channel: https://t.me/biz_in