The Project Risk Maturity Model

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Initiate Risk Identification Risk Analysis Identify Analyse Manage Process Project Management Risk Responses Plan Responses Implement Responses Figure 1.3 PRAM Guide mapping for four of the RMM perspectives Engage Stakeholders in Process Initiate Identify Analyse Plan Responses Implement Responses Manage Process Figure 1.4 Augmented version of the PRAM Guide process
10 T h e P r o j e c t R i s k M a t u r i t y M o d e l The argument that the stakeholders’ perspective is critical to overall project risk management capability is illustrated in Figure 1.4. This is the same process diagram as that shown in Figure 1.3, but with the role of project stakeholders in the process differentiated explicitly from the project team’s internal management of the process. The RMM thus treats the project team’s internal management of a project risk management process as being not in itself sufficient. The RMM treats the following parties as being project stakeholders: • • • • • The owning organisation (as represented by its senior management), the project’s lead customer, main (first tier) suppliers, other suppliers in the project hierarchy, and end users of the project’s products. In practice, all projects have a lead customer, even if the customer is another person (that is, the project sponsor) or another group within the same organisation. Since it is unrealistic for customers to transfer the implications of all risk to the project team, risk needs to be managed from the customer’s perspective as well as that of the project team’s. This does not imply that a project should manage its own customer’s risk; customers should manage risks that they own. Rather, it implies that it is in a project’s own interests that its customer manages risk effectively and retains, shares or transfers risk appropriately. Furthermore, the effects of many types of risk are often felt by both customers and projects. For example, schedule delay will, in different ways, affect both. There are therefore usually significant aspects of risk in which the project and customer have a mutual interest. Failing to engage the customer in the risk management process will fail to exploit this fact. It should also be remembered that customers control the agreement of project objectives. This gives them ownership of project strategy risks associated with whether or not the project’s objectives are appropriate. Since projects may be in a position where they might be able to advise on and thus influence decisions related to setting objectives, this is another point on which there should be customer engagement in the risk management process. Projects that are reliant on the delivery by suppliers of aspects of the project that involve risk are themselves customers. The arguments above concerning the need for customer engagement thus apply equally, albeit the relationships involved are reversed. There should be a strong link between risk management and contracting strategy; some of the most effective risk responses are contractual. Projects that have risk management weaknesses from the stakeholders’ perspective often fail to manage this link effectively. The argument that the risk management culture perspective is critical to overall project risk management capability lies in the observation that it may be possible for a project to convey the appearance of having an effective risk management process whilst ignoring the real implications of risk. Sometimes this might be due to unconstructive behaviour or sometimes it might be caused by a lack of understanding of what the risk management process should involve. Both are aspects of culture. Perhaps the most obvious recent example of poor risk management culture can be seen in the behaviours of people that led to the 2007 credit crunch and the consequent recession. It now seems clear that senior executives took risks that were inappropriate, and that, for some, their organisations had sufficient information to know that this was
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The Project Risk Maturity Model

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