Page 210 - Global Project Management Handbook

MANAGING RISKS AND UNCERTAINTY IN MAJOR PROJECTS 9-15

The management of both anticipated and emergent risks relies on rigorous and continuous
scrutiny of the project and its environment, which, in turn, relies on the competencies and
incentives of both the project participants and the networks to which they have access.
Being able to draw on diverse points of view and skill sets in the analysis of a risk and in
the elaboration of a response will be of great value whether the risk is anticipated or not. A
project structure that allocates risks to those parties with the means to control and respond
will be more effective in dealing with risks, whether they are anticipated or not.
However, there are two important paradoxes in attempting to establish a project con-
cept and organization that will anticipate risks and manage them effectively and at the
same time be resilient and responsive in the face of unforeseen events. First, an organiza-
tion that does a very good job of anticipating risks must realize that its job is only partly
done and that no amount of anticipatory risk management will prepare it well to deal with
emergent risk. Somewhat paradoxically, the organization must plan for the future while
knowing that the future will be different from that which it plans.
Second, the most efficient and effective means for dealing with anticipated risks can
introduce rigidities that reduce cohesion and responsiveness in the face of emergent
events. A rigid allocation of risks may create a situation in which project participants
have no motivation or incentive and limited possibilities to solve problems collectively.
Rigid contracts may be very efficient for the management of anticipated risks, but their
highly specified nature introduces rigidities that may hamper efforts to modify a project
and adapt to an emerging situation. There is a paradox between contractual efficiency in
the management of anticipated events and the provision of flexibility to respond to emer-
gent situations, often through contingent contracts. Striking a balance between the two
requires considerable judgment on the part of the project sponsor and participants.

CONCLUSION

Project sponsors and owners must create a project system that will effectively identify
and manage risks, applying excellent risk management as it is conceived and practiced in
the project management community to a very wide array of risks. However, the indeter-
minate nature of this complex system requires that the project organization also be
designed to face unanticipated or emergent risk as effectively. Infusing the project orga-

nization with the properties of cohesion and resilience requires an approach that goes
beyond the risk management approach currently practiced in the field of project manage-
ment. To face uncertainty, successful sponsors and owners must expend much greater
resources on imagining and creating futures than a traditional model would suggest.
Good sponsors and owners become project champions that

Dream big but willingly submit to discipline and due diligence. Good project champi-
ons make daring acts of faith and sketch utopias as wonderful, compelling possibili-
ties. During the front-end period, creative ideas need to predominate. Nevertheless,
projects must be submitted to tests periodically. Without discipline, erroneous com-
mitments may be made or projects may be abandoned prematurely. Worse, the
wrong projects may be built efficiently.
Avoid locking in too early or too late. Good sponsors and owners are cautious in mak-
ing irreversible commitments, but they recognize that eventually they must make such
commitments. Sponsors must avoid making irreversible commitments until they gain
enough knowledge to make reasoned choices. Effective sponsors cannot remain flexi-
ble indefinitely; eventually, bold actions and large investments are necessary. By con-
trast, during the engineering and construction period, committing as fast as possible to