This post from AlphaPM gives three outstanding tips to move your next project futher from failure and closer to success. Utilizing a mix of common sense best practice and experience-based wisdom, the post indicates that no-matter the size of the project, these three practices should be followed and utilized:
- Remove the most likely risks from your project
- Establish a project contingency reserve
- if you can’t get approval for the contingency reserve, do it anyway
the second and third are bold suggestions, and may go against your view of how the structure of your company works. However, the post’s intent is to help you establish a risk management plan that works, not necessarily makes everyone happy.
The idea of the project contingency reserve is to use a formula to determine how much of your budget is needed for unexpected issues:
Add up the Expected Monetary Value (EMV) for your top five to ten risks – this amount will typically be about 10 to 15% of your project budget and should be obtained as an additional “Project Contingency reserve”. You should use your list of top risks and expected impacts as justification to your management and client for the additional budget needed to establish this project reserve. If the total EMV for your top risks is greater than say 15%, even after you have eliminated the risks with probability of occurrence greater than 50%, than you still have too many risks and should also treat some of them as events and eliminate those from your project risks.
The post goes on, explaining that even if you cannot get approval for a contingency reserve, you should reduce the estimates on your other project activities to carve one out. In most cases there are enough buffers to allow for a reduced time on activities, and you’ll still gain the benefit of a reserve.