Monday, November 5, 2012

The Frustrated Farmer Performs Risk Management



    

    A farmer must move a chicken, fox and wheat across a river.   Why this farmer has a fox is unimportant, but the fox belongs to the farmer so he must move it across the river.  The farmer has a raft that can take him across the river, but there is only room for him and one object.   The chicken will eat the wheat, if unsupervised.  The fox will eat the chicken, if unsupervised.  The raft has no propulsion device other than the farmer and the farmer has no rope. What is the farmer to do?   This riddle explains risk management well.  If you aren’t thinking about the risks involved in your project, then you are likely to lose your chicken because you left it with the fox.    The riddle also shows that the risk management plan, isn’t something separate from the project plan, but an integral part.  The risk management plan is defined a plan that documents the procedures for managing risk throughout a project.   Risk is defined as an uncertainty that can have a negative or positive effect on meeting project documents.  Let’s go back to the farmer.  Without analyzing the risk, the farmer goes ahead and crosses the river with the fox only to come back and find the wheat was eaten by the chicken.  At least, the farmer had a short project with which to deal, albeit the project was a failure.  

    Let’s say instead the farmer took a project management class and when through the six steps of risk management.  Hopefully before leaving for the river, he would have planned, identified risks, performed qualitative risk analysis, performed quantitative risk analysis, planned risk responses, and monitored and controlled.  This allowed him to identify the risks of the fox eating the chicken, the chicken eating the wheat, and the problems of crossing the river.  It is clear the project objectives can not be completed without planning for these risks.  These risks should be an integral part of the plan.  The farmer performs qualitative and quantitative risk analysis.  In the qualitative sense, losing any of the three items is horrible for the farmer.   No cost can be associated with the fox, so the value of the fox is purely qualitative.  The farmer just likes the fox that much.  In the quantitative sense, the wheat and the chicken cost $50 and $20 respectively.  The loss of these items hit the farmer in the wallet.  The farmer can respond to these risks in four ways, avoidance, acceptance, transference, and mitigation.   Clearly, he can not accept the risk since  the consequences are too great.   He transfer the risk by hiring a moving company, but this is too expensive.  He could mitigate the risk by never leaving the fox alone with the chicken or the chicken alone with the wheat.  This seems to be a good idea.  However if the farmer was smart, he included risk management in his initial planning versus considering it separately.  He then avoided the risk by not taking the river route or bringing his friend Bob to help him move the items.  Either way, the risk is controlled before reaching the river.

    While risks can not always be avoided, all risks are easier to control when they are identified early in the planning process.   Too many people see risk management as a Cover Your Avenues (CYA) asset that is done after planning.  This is the wrong way to approach risk, risk should be the plan.  

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