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CONTINGENCY 179

Risk Identification, Quantification, and Mitigation

Certainly, risk in projects goes well beyond time issues. There is the potential for
technical risk and cost risk, as well. In addition to several software packages that
support the PERT method for risk, there is also software to address all risk issues.
This class of tools is used to identify risk areas, to quantify these risks (probability of
occurrence and impact of occurrence), and to record risk mitigation plans. In my
opinion, no project should move forward without applying this risk analysis method.

Contingency

We cannot talk about risk without talking about contingency. Contingency is one
of the ways that we deal with risk. Contingency also can take many shapes. We
can consider contingency for time, cost, resources, and workscope.

Contingency for time (schedule contingency) has gained increased attention
from the Theory of Constraints concept that was advanced by Dr. Eliyahu Goldratt,
in his book Critical Chain. We discuss this concept and the entire topic of shared
contingency in Chapter 3.2.

Because contingency is an issue for schedules, resources, costs, and workscope,
we have discussed this subject a bit in the sections devoted to those topics. How-
ever, if contingency is a way that we deal with risk, then we need to cover it here as
well. In Chapter 6.1, we bring everything about contingency together and devote
an entire chapter to the full span of project contingency concerns.

In addition to the formal methods for risk analysis and management, there are
several things that we can do to address risk issues that are just based on common
sense, and do not require any special tools (besides traditional CPM software).
We cover this in Chapter 6.2, Risk Management for the Sigmaphobic, as part of
our commitment to presenting practical project management.

But then, there are also some good special tools for risk analysis and manage-
ment that deserve our attention. We discuss these analytical concepts and the
supporting software in Chapter 6.3.

Risk is also an essential part of project portfolio management. So we’ll save a
little part of our attention to risk for a chapter on project selection and risk, in
Section 9. If you are concerned with risk (which you should be) please don’t miss
this chapter in the Project Portfolio Management section.