Project management is often described as managing the triple constraints of technical work scope, schedule, and cost. These constraints can be thought of as an "iron triangle", i.e., you can constrain one or more sides but the remaining side is going to give! You can't impose all 3 constraints on a project at the same time, but need to think of how you trade off performance for schedule, or trade off schedule for cost, etc.
Risk is inherent in every project. (On the flip side, if there were absolutely no risks, we probably wouldn't have a project!) So how can a project manager really understand the integrated nature of project risks? How can you better identify these risks, which leads to better control?
EVM is invaluable in the risk management process, as it a project management technique that integrates work scope with a project's schedule and costs. Using EVM to manage a project means that you will need to define the work scope, plan a timephased schedule, and then assign budget resources against the schedule. This process of integrated planning usually reveals additional project risks that may not have been discovered by planning the work or schedule in isolation. Thus, planning of the project's EVM baseline allows you to identify these risks and incorporate risk buffers in the project plan.
Here then, are the key elements of managing risk with EVM.
- Establish a project plan that includes risk buffers as appropriate.
- Technical buffers or trade space. What is the allowable trade space for product performance?
- Schedule buffers. Establish a realistic schedule, with buffers at key points to protect the critical path.
- Budget buffers. Establish a management reserve at the project level. Management reserve should be reserved for new effort that is within scope of the project. Risk mitigation efforts or realized risks can draw budget from management reserve into EVM control accounts, where these efforts can be planned and budgeted.
- Review the approved EVM baseline with your customer to jointly evaluate risk. This is typically called an Integrated Baseline Review (IBR).
- Conduct other risk evaluation reviews, such as an Integrated RIsk Assessment or a Schedule Risk Assessment. Analyze these results against the project's EVM baseline.
- Establish a set of integrated risk metrics.
- Look for the early warning signs
- Use metrics that make sense, measure risk, and are relatively easy to collect
- Be consistent in applying and reporting risk metrics
- Integrate the status reporting of project technical risks with EVM variance analysis.
- Make risk and EVM reporting the heart of project status meetings. Evaluate metrics and progress, forecast where you are going, and let the team take the appropriate steps.
- Establish a process to estimate cost and schedule risks, as well as probability and consequence.
- Track risk burndown plans. Integrate this analysis against a review of the remaining EVM baseline and cost and schedule trends to date.
- Finally, it's often a question of ownership. The project manager must commit fully to seeing the big picture and for being fully accountable for not only managing technical risk, but schedule and cost as well.
- Integrate the processes by integrating the team. Don't let the processes devolve into separate functional stovepipes.
- Train the team.
In future postings on this topic, I'll go into more detail on these points.