As the term projectship grows in popularity, cost impact events (CIEs) are becoming more common. As a result, there is a greater understanding of what CIEs mean and how they cost money.
As the term projectship grows in popularity, cost impact events (CIEs) are becoming more common. As a result, there is a greater understanding of what CIEs mean and how they cost money. CIEs can run the length of project life cycle from initial idea to final product or service. They can occur during pre-development, development, and post-delivery phases of a project.
As the term projectship grows in popularity, cost impact events (CIEs) are becoming more common. As a result, there is a greater understanding of what CIEs mean and how they cost money.
Be smaller if the risk is mitigated
When a risk event occurs, the cost may be very high. This is the case when a risk event occurs as a project continues through its life cycle.
Most projects do not have a chance to assess their risk and determine if it has been mitigated. For example, in the construction industry, projects can go out for approval. Then they need money to implement their plans. Once that happens, they can implement their plan!
However, if projects do get approval, then they need money to implement their plans. So, once again, there is an opportunity for an outside source to assess the risk and determine if it has been mitigated.
If you notice that there are not as many risks occurring on your project but that they are occurring as a result of an outside source assessing the risk and determining if it has been mitigated, then you have evidence of this being mitigate.
Be larger if the risk is materializing
When a risk event occurs as a project is going through its life cycle, the cost can be significantly larger than it would be if the risk event did not occur.
This is true for two reasons. First, when a risk event occurs during the pre-construction and construction stages, it can cost more due to increased costs associated with changes in plans or building materials. Second, when a risk event occurs during the operational stage, it can cost more due to changes in security or operational standards.
These differences can be significant, and are worth taking into account when evaluating a potential mitigation strategy. For instance, if security standards decline during an operational phase of use, then the risk mitigation strategy should do something to reduce this decline in security.
To explain further, consider the following hypothetical scenario: A major airline suffers an intruder attack that compromises passenger data. The intruder successfully targets one individual using their credentials before they are transmitted across wireless networks and servers. This attacker successfully accesses multiple personal records before being stopped by administrative defenses.
Understand the impact of cost overruns
When a project costs more than its initial cost estimate, it is due to additional costs incurred during construction or product production. Cost overruns can be significant enough to effect the confidence users have in the product and service they are receiving.
In extreme cases, when the added cost is significantly higher than expected, investors may withdraw funding and/or direct sales of the product or service cease. This can be very disheartening for those involved, who had invested their lives into the product or service.
Withholding funding or being forced to spend more money to achieve a goal can be incredibly difficult, but it must be done in order to preserve trust with investors and/or continue operations.
It is important then that project leaders take into account possible cost overruns when projecting final budget costs. This does not mean that all projected budget amounts will need to be met, but only those that are likely to result in an increase in budget will be taken into account.
Understand the impact of schedule overruns
Most engineering and construction projects have some schedule overruns. This is part and parcel of building things, in my experience.
However, if the project is not completed on time, then the end product is not completed on time. This can be a disasterous scenario where safety and quality are thrown out the window.
In this case, the customer is going to be looking to re-complete their deal at a later date or finding another solution for what they needed.
If an event occurs as a project is continuing through its life cycle, then it may be able to cost some money. The event may have occurred before it was completed or during its completion.
It is important to understand what effect an event can have on cost when this happens as the project continues through its life cycle.
Plan for mitigation efforts to succeed
As discussed earlier, a major component of risk assessment is planning for what could happen. This includes planning for possible mitigation efforts should those actions prove unsuccessful.
For instance, assuming the threat of an incident is low at initial project start-up, it may be beneficial to not fully expect success but rather trust in the system and management to deliver successful outcomes.
In this case, it would be wise to put aside funds for contingency plans if the project fails but not due to lack of effort on the part of management or staff.
Even with minimal preparation, disasters do happen and you want to be able to respond effectively. That means having enough assets on site and/or in the field in case of an emergency. It also means having resources available should an event occur that requires quick response.
Avoid taking on too much risk at once
As noted earlier, credit scores can help you assess how much credit you should have when looking to borrow money. A high score indicates you can easily afford what you want to borrow, which is one of the things that imperatives a mortgage loan.
However, a high score doesn’t indicate you’ll be able to repay a debt in full at times. For example, if your debt was caused by an event that was not financially significant, but still emotionally significant for you, then it may be worth considering a higher-level mortgage loan to reduce your risk of not being able to pay off the debt in full.
In addition to a high score indicating good creditworthiness, having more than one or two debts with different lenders can help reduce the risk of having one major debt take over and total your life savings away.
Understand the impact of uncertainty on your project
As we discussed in a previous article, uncertainty is one of the greatest predictors of risk. That is, when we do not know what will happen, it can be difficult to determine how to manage risk.
Therefore, when there is significant doubt around an event or event, it is important to determine the impact of uncertainty on the project. This can be done by introducing multiple layers of management or by creating multiple disciplines working together.
By having these additions of layers of management and disciplines working together, you are showing your stakeholders that you are considering their needs and wants as you go into this project. You are also demonstrating that you understand the need for certainty in order for everything to continue successfully.
Striving for more trust and awareness between all parties involved will help achieve better results in managing risk.
