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44 PM NETWORK june 2012 WWW.PMI.ORG

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june 2012 PM NETWORK 45

Poor risk communication can derail your project. Here’s

when and how to warn

your key stakeholders

about potential threats.

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tsb y D e n e n e b r o x

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EEven the most stringent risk management won’t get the job done without strategic communication. In fact, poor communication is a risk itself if key stakeholders aren’t kept informed.

Project managers are on the front line of communicating potential and impending risks to an assortment of stakeholders—and each demands dif-ferent information. To articulate risks, begin here:

Understanding appetites and tolerancesProject managers must first understand their organization’s risk tolerance.

“As a project manager, you don’t have the authority to overstep the bounds of risk tolerance for your organization,” says Barry Molnaa, PMP, Los Angeles, California, USA-based director of project management at Arcadis, a design, engineering and management consultancy for the infra-structure, water, environment and construction industries. “It’s important to have an understanding of what risks your organization is willing to tolerate and how to manage those risks.”

An organization’s risk appetite can vary based on its age, says Evan Wheeler, director of information security for Omgeo, a financial trade processing service provider in Boston, Massachusetts, USA. A growing company may be willing to shoulder more risks to move forward quickly, whereas a well-established corporation could tend to be more risk-averse.

“Anyone who’s in a risk-management role needs to understand his or her company’s threshold,” he says. “You need to know when you’ve hit that threshold and when something needs to be reviewed and a decision made about how to proceed.”

Project managers who work for a variety of clients need to acquaint themselves with each client’s risk tolerance at the start of every project.

Even if his clients have firm risk-management processes in place, senior consultant Marc Burlereaux, PMI-RMP, PMP, PgMP, conducts a risk analysis on every initiative. He’s currently working as a European release manager for a private bank in Geneva, Switzerland.

At the beginning of each project, he holds a kickoff meeting with the sponsor to evaluate the risk appetite depending on certain criteria, includ-ing whether the project is tactical or strategic, and what the change impact will be.

Some organizations don’t have a project management risk policy estab-lished, putting the onus on project managers. Such was the case at Contax, a company that deploys contact centers, when Fabio Pitorri, CAPM, PMI-RMP, PMI-SP, PMP, PgMP, came on board. Mr. Pitorri, a consultant and


71 percentThe portion of organizations that now practice risk managementSource: PMI 2012 Pulse of the Profession Report

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instructor at Dinsmore Associates in São Paulo, Brazil, got up to speed by studying project documents, reading the project management office bibliography and interviewing stakeholders. He then developed a risk-management plan that he presented to executives for approval.

Once you have a solid understanding of your company’s risk-tolerance threshold, you’re better equipped for an effective risk com-munications plan.

TargeTed Messaging Each of your various project stakeholders has his or her own agenda and goals. Your organization’s executive team requires particular information and a different communication style than your team members, who are involved in the day-to-day details of delivery.

“Generally, as you go further up the corporate chain, people want to see more of a summarized review,” Mr. Wheeler says.

Your job as a project manager is to balance those various needs to communicate risks and risk-mitigation actions in ways that are relevant to each of your stakeholders. Gather that information during your early risk-tolerance exploration phase.

Keep these points in mind when it comes time to articulate risk for four different groups: executives/senior management, team members, business managers and external stakeholders.


Executives/Senior Managers

Executive leadership is concerned with the overall success of the project and may define success differently than someone who’s actually working on the project, says Mr. Molnaa, who’s also a risk analysis and project management instructor at UCLA Extension, part of the University of Cali-fornia at Los Angeles. When articulating risk to this group, point out the severity and likelihood of a particular risk event, he suggests.

“Senior management needs enough detail in terms of milestones to gauge whether progress is being made, so they want to see major mile-stones,” Mr. Wheeler says. “Senior leaders may not want to know all the gory details about how you came to a conclusion.”

If a risk can be mitigated by adjustments within the control of the proj-ect team and the completion date isn’t affected, then it probably doesn’t need to bubble up to the executive team level.

“Senior leadership needs to be aware when trade-offs must be made,” he explains. “Maybe another project might have to be delayed to keep this one on track, or another internal initiative might need to be postponed. Another scenario is trade-offs might need to be made in terms of the deliv-erables from the project. Some nice-to-haves might have to get dropped to allow for the essential targets to be met.”

as a projecT Manager, you don’T have The auThoriTy To oversTep The bounds of risk Tolerance for your organizaTion. — Barry Molnaa, PMP, Arcadis, Los Angeles, California, USA

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Team Members

Project team members are working at the task level and appre-ciate more details on how impending or potential risks will affect their work, Mr. Molnaa says. “They’re asking questions such as, ‘Is my task going to be completed on time? How does what I do on my task affect what happens on subsequent tasks?’”

Stakeholders at the project level likely will not just want to know what the issues are, but also a detailed account of how those were prioritized and how they will be mitigated, Mr. Wheeler says.

Regular team meetings keep team members abreast of risks and action plans throughout the initiative’s life cycle, he suggests.

If the need arises to discuss particular risks, schedule a meeting with the relevant project team members. “Identify appropriate risk response actions, assign ownership of the risk to a specific team member, and develop a risk plan and moni-toring approach,” Mr. Molnaa says.

Business Managers

Business managers tend to have simple priorities and usually are most concerned with completing projects on time and within budget, Mr. Wheeler notes.

“They want to look at the big picture, so when you have multiple poten-tial issues to report, look for commonality to group them together,” he advises. “You might categorize them by root cause, by consequences or by common mitigations. This way, the management team gets a feeling for the magnitude of the problem without having to read through the detail of every individual risk.”

When there is a risk to the quality of a client relationship, your business managers will want to know about it as soon as possible. As a consultant for an engineering firm, Mr. Molnaa’s business managers aren’t only focused on profit.

“They’re concerned about making sure that we maintain a consistent level of quality on our deliverables that allows us to maintain a high level of client satisfaction,” he explains. “When you’re doing outside projects, most of your projects come from repeat business.”

To communicate that you’re maintaining a positive relationship with your clients, regularly report on any potential risks that could hamper the relationship.

Project team members

appreciate more details on how impending or potential risks will affect their work.


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External Stakeholders Communicating risk to external stakeholders can be tricky, Mr. Molnaa says. Because this group isn’t familiar with the particulars of project risk management, you have to fully explain concepts, avoid jargon and show benefits to gain acceptance.

For instance, the public might react negatively to an infrastructure project, focusing on short-term inconve-niences during construction. One method Mr. Molnaa has found effective is to hold meetings and invite the public to ask questions.

“It’s important that we communicate the long-term benefits such as less traffic congestion in the end,” he says.

For other external stakeholders, Mr. Pitorri has found that explaining risk on an individual basis can be effective. That’s how he chose to communicate with external stake-holders on a project to replace an important infrastructure component at a contact center with 5,000 employees. The implementation generated the need to turn off the build-ing’s power for 10 minutes—interfering with the workflow of other building occupants.

A key impact Mr. Pitorri needed to communicate was that the power might not be reestablished after 10 minutes. When explaining the risk, he emphasized that the activity was scheduled to take place over the weekend at midnight, which greatly mitigated the impact by reducing the number of people who would suffer if that risk occurred.

“However, there still were some non-related clients who needed to be at work during the shutdown,” Mr. Pitorri says. “To avoid confusion, risks were identified and discussed individually with each one, and potential problems were presented to each.”

While the project was completed successfully and with minimal unexpected interruption, Mr. Pitorri found that communicating ahead of time gave external stakeholders and the project team ample time to plan together their risk responses and maintain positive relationships.

“The main lesson learned was that we can deliver a more successful project if we properly interact and communicate with all related stakeholders,” he says. PM

Project team members

appreciate more details on how impending or potential risks will affect their work.

Because external stakeholders aren’t familiar with the particulars of project risk management, you have to fully explain concepts, avoid jargon and show benefits to gain acceptance.

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