Once or twice a year, R2A, as due diligence engineers, are called upon to investigate projects which have not gone well. Clients do not generally permit us to discuss such investigations, unless it’s a public inquiry of some sort, but there are common threads that emerge. For the most part R2A includes such learnings in our text, Risk and Reliability: Engineering Due Diligence.
Whilst some issues are peculiar to an organisation, the most common difficulty across projects seems to rest around an exclusive reliance on the Risk Management Standard (ISO 31000) as the basis to manage risk. For high consequence, low likelihood events (the potential ‘project showstoppers’) the Standard fails the test. The reason is simple; it is risk based not criticality based.
Risk based means the management of identified risks is by the simultaneous appreciation of likelihood and consequence. Criticality based means that the likelihood side of the risk equation is initially ignored if the event is credible and could prove fatal (completely stop the project). The diagram below describes the conundrum for senior decision makers responsible for multiple large projects, the failure of any of which might bring down those decision makers.
The perspective of both the individual project managers and the senior decision makers are correct, but contradictory. An individual project manager can confidently state, using risk based approach, that yes, a critical possibility does exist but it is so rare that delaying the project on that account cannot be justified. The project should proceed.
The senior decision makers on the other hand see the critical risks from 100 project managers. Even though such risks are rarely manifested, the 100 credible show stoppers are all focussed on this single group. From this top-down perspective projects ought not to proceed until the show stoppers are eliminated. The alternative is to proceed optimistically until one show stopper to one project eventually happens and the inquiry commences.
R2A is focused on the prevention side which means that projects ought not to proceed until the show stoppers are dealt with. It’s the only place to be.