Avoiding the downward economic spiral

Bassam Samman

Bassam Samman discusses the importance of risk management, particularly during the downturn.

Organisations are now seeing the importance of investing in new projects that will help them meet increased consumption demand and maintain and recapitalise their existing assets.

Nevertheless, project investments are known to be subject to high risks of failure. According to a US survey, almost 70% of undertaken projects fail to achieve their original set objectives.

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And this is a major threat – investments wasted in failed projects become sunk costs that organisations can’t recover, but it would mean that they have wasted the opportunity to invest those funds in other projects, which could have been beneficial.

Unlike controlled operations, a key feature of each project is that it is unique. The issues and problems associated with each project delivery differ from one project to the other.

Risks are inherited in each project delivery regardless of measures an organisation takes in identifying and managing risks.

Project risk management is driven by the organisation’s top executive level. It is at that level when an organisation is labelled as aggressive or conservative. It is also at that level where the attitude towards risk exposure gets determined and communicated throughout the firm.

An organisation’s CEO has the duty to select and set the priorities for what objectives need to be considered when a risk analysis is done. In light of the economic crisis, organisations are finding it more important to select the right projects and when selected, delivered the right way from the start.

Therefore, it is crucial that proper risk management practices are implemented when deciding what projects should be selected for execution.

Portfolio Risk Management
The Portfolio Project Management concept is recognised as the link that executives and CEOs have lacked in order to align project investments with their organisation’s strategic goals.

Through those processes, executives are now able to follow a proven methodology for detailing different investment initiatives required to achieve their strategic goals and then apply a process for categorising, evaluating, prioritising and selecting what project investments to sanction. The portfolio project management methodology has identified four processes:

Identify portfolio risks—this process will help identifying which risks may affect projects portfolio and documenting their characteristics.

Analyse portfolio risks—this will help to identify how to assess and combine the likelihood of occurrence and impact on selected objectives of identified risks.

Develop portfolio risk responses—this helps to develop options and actions to enhance opportunities and to reduce threats to portfolio objectives. Response actions for negative risks could include identifying actions to avoid the causes of those risks or reduce the likelihood of those risks to occur.

Monitor and control portfolio risks—This process helps to track the identified risks, monitoring residual risks, identifying new risks, executing risk response plans, and evaluating their effectiveness throughout the projects portfolio life cycle.

Organisations looking to avoid diving down the economic spiral need to give great care to risks in their project investments and adopt practices to identify, analyse, respond and manage those risks, not only at each project level but also at the organisation enterprise level.

Further, risk management is an executive action where executives have the duty to create the policies and impose the processes that will ensure not only project investments are aligned with the organisation’s strategic objectives but that all project risks are aligned with the enterprise risks.

Who is Bassam Samman?
Bassam Samman is the CEO and Founder of CMCS, a supplier of project management solutions. He has 26 years of experience in the field. He graduated in civil engineering from Kuwait University and earned a masters degree in Engineering Administration from George Washington University.

Samman is a certified project management professional and a certified planning and scheduling professional and earned value professional. He is a founding member of the Project Management Institute Arabian Gulf Chapter and served on their board of directors for more than six years.