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SECTION 6

RISK MANAGEMENT
AND CONTINGENCY

Did I just say that Cost was the weakest link (Section 5)? I take that back. It is
Risk Management that seems to get the least attention. Why is risk manage-
ment virtually ignored as an integral part of the project selection and manage-
ment process? We all recognize that risk is an important part of all projects. If we
thought about it, we would all acknowledge that the management of risk could be
the most critical factor in project success. Yet as I look at the practices that have
been put in place in most firms, and at the tools that are being used to support
these practices, risk analysis and management are most often missing.

“Risk Is a Four-letter Word
(But Denial Is Our Biggest Enemy)”
This was the name of an article that I wrote in 1999. I was shocked by how often
otherwise intelligent professionals could ignore the potential downside of a pro-
posed project or business venture. This was usually because they didn’t want to
admit that a potential downside existed or they were afraid that, if they acknowl-
edged the potential risk, the proposed project would not be granted approval. You
cannot make risk go away just because you don’t like bad news. Risk must be eval-
uated, and, where the risks can significantly damage the project, there should be
risk mitigation plans in place.

The Many Colors of Risk
There are many sources of risk and they can take many shapes. We just need to
look at some of the more well-known catastrophes to see the breadth of this thing
that we collectively call risk.

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