Industry

20 NOV 2019

COUNTING THE COST OF RISK MISUNDERSTANDINGS

Risk management expert Andrew Cullis discusses how a focus on clear communication can increase understanding, enabling stakeholders to mitigate risks and seize opportunities.

While it may not always be a message that people want to hear, effectively communicating risk can play a critical role in preventing time and cost overruns on major-scale programmes. By injecting a human element into risk conversations and tailoring communications according to stakeholder groups, project managers can increase risk understanding, and ensure decision makers are well informed. 

In the fast-moving world of project management, miscommunication should be considered a risk in itself. As programmes continue to grow in scale and complexity, the risk of misunderstandings arising is also increasing; from a misinterpretation of the client’s requirements to a lack of clarity when instructing construction and design teams. 

While the risk of miscommunication can often be difficult to quantify, it can have a profound impact on project delivery outcomes. Even if risks have been identified and assessed, and robust mitigation strategies have been defined, action is unlikely to be taken unless these matters have been clearly conveyed to the relevant stakeholders. As such, a valuable opportunity to reduce the probability of things going wrong may be lost, potentially resulting in additional costs, programme delays or over-delivery.

One of the key challenges involved in communicating risk is the tendency for project managers to be overly optimistic. Mega project expert, Bent Flyvbjerg, famously said ‘It is not the best projects that get implemented, but the projects that look best on paper. And the projects that look the best on paper are the projects with the largest cost underestimates and benefit overestimates, other things being equal.’ While an upfront and honest discussion about threats to a project’s success is unlikely to prove popular, ignoring real-world risk could end up costing stakeholders dearly in the long run.

Adopting a solutions-focused approach to risk management and communicating this to stakeholders in a structured and coherent way will help to avoid complacency and could open up opportunities. Risk is often a difficult sell, and human nature means that people are often reluctant to dwell on negative elements, assuming that ‘it’ll be alright on the night’. With this in mind, setting out practical solutions to the risks that have been identified, and clearly communicating how these will be implemented, is vital to help steer projects out of danger; risk mitigation plans are of little value unless they are acted upon. 

In order to create a culture of risk-centricity on projects, project managers should constantly refer back to the specific impact that different scenarios could have on the programme’s overall objectives. While each risk can have a range of possible impacts, those linked to money and time are most likely to grab stakeholders’ attention, as these are the metrics most commonly used to measure a project’s success and could also have an impact on the business’ reputation. Project managers who discuss the benefits of risk management in terms of adding and protecting these performance measurements will stand a greater chance of securing buy in at all levels of the organisation. 

In order to create a joined-up picture of risk, project managers should tailor their communications approach by stakeholder group. Effective risk management involves extracting information about risk from teams working across a range of disciplines and communicating it upwards. For example, a conversation with a construction engineer to learn more about onsite risks will require a different approach to a discussion with a project director, about the programme’s overall budgetary risk exposure. Ensuring all areas of a project are represented in risk assessment discussions and putting in place a range of different communications strategies, for example, group workshops and one-to-one meetings, is key to developing a strong risk understanding and putting the right mitigation strategies in place in good time.

The growing complexity of infrastructure programmes means that risk identification and assessment are not enough – effective risk communication is also crucial in order to optimise project delivery outcomes. By adopting a personal, solutions-focused approach to risk communication, project managers can win the stakeholder support needed to mitigate risks and keep things on track.

Andrew Cullis is a risk analyst at risk management consultancy, Equib.

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