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I’m looking forward right now to an interesting experience: getting interviewed on the radio.  I’ve been asked to talk about my book Estimating Risk.  The interviewers are from a US-based internet radio channel, PMChat, who do an interview once a week on Fridays and follow it up with a Twitter chat between their followers.  Apart from anything else, this is quite technologically challenging.  I’ve had to open a Twitter account and figure out what it’s all about.

But it’s quite timely as I’ve recently been working on a report about how leading organisations in the UK tackle cost risk and uncertainty, aiming to build in a reasonable contingencies while making sure they do not spend them unnecessarily.  A key question is the role of quantified risk estimates in creating a business case and then controlling cost as the project proceeds.

As part of this, I was lucky enough to meet the senior civil servant who acted as customer for the Olympic infrastructure programme.  The Olympic Delivery Authority (ODA) was responsible for constructing the Olympic Park, the stadia and the other venues, obviously to a very specific timescale.  The customer for this was the Department for Culture Media and Sport (DCMS) who were the main funders.

The Olympics had a very strong culture of openness so you can find out about their approach to risk and contingency at their lessons learned website.  The story told there is a very coherent one.  At its centre is a change control process which administered project AFCs (anticipated final cost) in a very dynamic way recognising that AFCs need to recognise emerging trends, risk and uncertainties.  So a key element in the AFC is the risk component which is built up from risk registers in a fairly standard way.  If you are a project manager and you need more money to fund the risks which may or may not materialise you need to increase your AFC and get it agreed.  This amounts to drawing down contingency.  So far, that’s not much of a story; the important thing is that it worked where similar systems haven’t.

What was the key to this?  My interviewee identified two factors.

First it was important to have the right systems: a risk database, a budgetting system, a planning system and an earned value system which all worked together as a single source of truth, producing contingency dashboards and the like.  These then provided the information to support decisions about allocating funding, selecting options and so on.

But what was equally important was creating the right cultural environment for these tools to be used effectively.  It involved an atmosphere of rigour, transparency and objectivity.  This is necessary to make the right decisions quickly, whilst some other organisations are indecisive or over-burdened with traditional financial control obsessions which don’t recognise the reality of risk.  Underpinning this were excellent personal relationships and informal forums to progress issues outside the formal governance.  This in turn required excellent people, especially to maintain the mature and open discussions which were necessary and DCMS was prepared to pay for this.  What’s more they recognised that as a client it needed to have people with project and programme experience to lead on behalf of the Department.  And these people were supported by an experienced project controls team to take a close look at what the ODA was doing.

I think it’s possible that this enlightened approach lay behind the ensuing public sector success.  It could be contrasted with that of some other departments more used to managing capital programmes.  DfT, MoD and the NHS come to mind.  Needless to say this is my take, not my interviewee’s.

The whole story is interesting to me for two reasons.  The role of quantified risk estimates is an obvious one, close to home and the book.  But if you read the rest of this website you will see that I have many concerns about the way we approach risk management generally.  I’m thinking it needs to be done in a more natural way and that emphasises the importance of the risk culture.  So it’s great to see it being done well and even better to see the importance and nature of the underpinning cultural factors being recognised.

Maybe we’ll get onto this in our #PMChat.  But you can read more about this and see the Institute for Government report about ‘Making the Games’ on their website where there is a video-ed conversation involving David Goldstone (for it was he). 

The interview is today, 25 January, at 11.30 EST which is 16.30 GMT.   The Twitter conversation will start at 12.00/17.00 and last for an hour.  Looking forward to tweeting.

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