Acme Corporation

Acme Corporation embarked on an optimistic project to develop a new product for the marketplace. Acmes scientific community made a technical breakthrough, and now the project appears to be in the development stage, more than being pure or applied research. The product is considered to be high tech. If the product can be launched within the next four months, Acme expects to dominate the market for at least a year or so until the competition catches up. Marketing has stated that the product must sell for not more than $150 to $160 per unit to be the cost focused market leader. Acme uses a project management methodology for all multifunctional projects. The methodology has six life-cycle phases:

1. Preliminary planning

2. Detailed planning

3. Execution/design selection

4. Prototyping

5. Testing/buyoff

6. Production

At the end of each life-cycle phase, a gate/phase review meeting is held with the project sponsor and other appropriate stakeholders. Gate review meetings are formal meetings. The company has demonstrated success following this methodology for managing projects. At the end of the second life-cycle stage of this project, detailed planning, a meeting is held with just the project manager and the project sponsor. The purpose of the meeting is to review the detailed plan and identify any future problem areas that will require involvement by the project sponsor.

THE MEETING

Sponsor: I simply do not understand this document you sent me titled Risk Management Plan. All I see is a work breakdown structure with work packages at level 5 of the WBS accompanied by almost 100 risk events. Why am I looking at more than 100 risk events? Furthermore, theyre not categorized in any manner. Doesnt our project management methodology provide any guidance on how to do this? PM: All of these risk events can and will impact the design of the final product. We must be sure we select the right design at the lowest risk. Unfortunately, our project management methodology does not include any provisions or guidance on how to develop a risk management plan. Perhaps it should. Sponsor: I see no reason for an in-depth analysis of 100 or so risk events. Thats too many. Where are the probabilities and expected outcomes or damages? PM: My team will not be assigning probabilities or damages until we get closer to prototype development. Some of these risk events may go away altogether. Sponsor: Why spend all of this time and money on risk identification if the risks can go away next month? Youve spent too much money doing this. If you spend the same amount of money on all of the risk management steps, then well be way over budget. PM: We havent looked at the other risk management steps yet, but I believe all of the remaining steps will require less than 10 percent of the budget we used for risk identification. Well stay on budget.

QUESTIONS

1. Was the document given to the sponsor a risk management plan?

2. Did the project manager actually perform effective risk management?

3. Was the appropriate amount of time and money spent identifying the risk events?

4. Should one step be allowed to dominate the entire risk management process?

5. Are there any significant benefits to the amount of work already done for risk identification?