Change vs Risk Project Management

Change versus Risk: 

The quick and straightforward definitions for “Change” and “Risk” are as follows: changes are usually unexpected, and almost always unwelcome, though they need not be. More on that later. “Risks,” on the other hand, are typically identified, qualified, quantified, and planned for, to some extent, within the “planned risk response” process. However, there still could be some unforeseen aspects (i.e., changes) in identified risks. Our qualification and quantification of the probability of a risk occurring, as well as their impacts, are, as we all know, estimates and not an exact science. We genuinely do not know how bad or good a risk will be until it appears, and we address it.

On the other hand, “changes,” when they occur, almost always automatically come with risks. These can be negative risks (threats) or positive risks (opportunities,) but in both cases, these risks have to be dealt with on the spot along with addressing the change itself. In general, any variance from the project plan, especially related to any or all of the triple constraints (scope, schedule, and budget), is a “change.”

Project Management Change vs Risk

So when are changes a good thing? In general, this is not the norm. Still, it depends on 1) how you planned for “changes,” 2) your attitude (flexible or rigid, for example) with regards to change, and 3) like most other things, your experience in dealing with change and with the stakeholders affected by it.

To explain this, let’s use an example: “you are in the middle of a construction project, and the team notifies you, the project manager, that an important piece of building code regulation was missed and some retrofitting is required.” On the surface this would look like a disaster because 1) you must inform the client that a significant oversight was made, which might turn into a lack of faith in your work; 2) that additional costs will be incurred, which, of course, he or she may not want to pay, and which you and your company might be liable for; and 3) schedule and quality concerns might jeopardize the project.

Potential solution: if you put your experience to work from the beginning, you would have explained to your client, as well as other key stakeholders, that potential changes, especially those due to human error, are frequent, and we must remain open to that possibility. Also, it is common in the construction industry to expect change orders to run between 2 to 5% of the total project cost, depending on the complexity of the project.

Once the change has occurred, in line with PMI’s code of ethics and professionalism, we need to address them head-on and be honest about what has happened. We do not fall apart, but instead, we work with the team to find a solution. Our attitude here is vital. Being flexible, resourceful, and willing to cooperate is essential. Finally, having the proper experience in dealing with change is crucial. Therefore, if you identify a lack of such knowledge, having the right sponsor and mentor from the start will go a long way to incorporating changes into a successful project. Also, a PM experienced in dealing with change will point, in this particular example, that the oversight was caught and that the retrofits will improve the design and might even add value to the project.

Decades ago, after the 1989 earthquake in San Francisco, California, the prestigious Legion of Honor Museum was required to retrofit the foundations to strengthen the structure for potential future seismic incidents. In doing so, the construction company found out that more profound and more elaborate foundation work was required. This generated a significant change order. The museum used this change to its advantage by using the more extensive foundation work to increase the square footage of the exhibition areas. They took some relatively “bad news” and turned it into something positive and, ultimately, more profitable for themselves.

Change vs. Risk Project Management

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