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198 RISK MANAGEMENT FOR THE SIGMAPHOBIC

Pragmatic Methods to Control Risk

Actually, there is not much material in this chapter, or the next, that is not dis-
cussed elsewhere in this book. We present concepts such as accomplishment
value (a variation on Earned Value analysis), PERT durations, schedule contin-
gency, cost contingency, and (by popular demand) Monte Carlo schedule analysis
techniques. We draw these techniques together here to present a set of common
sense options for risk avoidance and risk management.

This chapter concentrates on low-tech, common sense methods to address po-
tential risk issues, for time, cost, and technology. We then, in Chapter 6.3, submit
to the demand of the more statistically oriented project managers, who argue in
favor of proven Monte Carlo risk analysis techniques.

All techniques can be supported by readily available software that is inexpen-
sive to acquire and simple to use.

Risk Avoidance

First, let’s agree that it is better to avoid risk (via better planning, not avoidance of
opportunity) than it is to manage risk (or problems arising out of insufficient plan-
ning and contingency). That is, risk control requires proactive management,
rather than reactive management.

Trap Some people define avoidance of risk as avoidance of
opportunity. That is, rather than taking calculated risks, they
avoid anything that contains any risk. This, of course, reduces
the number of options that are available to achieve stated
objectives. In development projects, it often means that the
product is weakened by excluding the latest technical ad-
vances. A safer, risk-free strategy can lead to an unsuccessful
project just as much as a project with risk. When we talk
about risk avoidance, we are talking about qualifying risk,
not avoiding it.

Here are some of the major components of the risk management for sigma-
phobics approach.