Risk: In Business Project Management, it isn’t a game

For me, the word risk used to invoke images of the classic board game, where players competed for world domination by building armies and invading opponents’ territories.  Players would draw cards to divide the global regions, and then roll the dice when attacking and defending the game’s political borders.  Developing a strategy – such as fortifying your borders, forming alliances and avoiding being spread too thin – is an important element of the game.  For instance, knowing that Oceania is the safest continent to protect and that Europe is the most difficult (a lesson we learned from Kramer and Newman) can give you an advantage over the other players.   While the outcome of the game of Risk is largely dependent on luck – luck of the draw, roll of the dice, and playing your cards right - it is still important to have a good strategy.

Now, when I think about risk, I think about the risk management challenges my clients, and those my Deloitte colleagues, face every day.  I think about the uncertainty and complex problems organizations must overcome when conducting business and planning for the future. 

I moderated a Dbrief this month on the strategies related to large-scale capital project management and investment.  A recurring theme my colleagues (Charles Alsdorf, Glen Justis and Joe Messick) and I identified during the development of the Dbrief was the risks impacting capital planning.  Such risks include:

• Market Risks (e.g., volatile GDP, inflation, commodity pricing, rising interest rates)
• Climate Risks (e.g., global climate change, seasonal weather patterns)
• Regulatory and Policy Risks (e.g., federal budget uncertainties, political unrest, and changes to environmental, infrastructure, healthcare, education and tax policies, priorities and funding)
• Competitor Risks (e.g., actions and responses)
• Customer Risks (e.g., demand, willingness to pay, managing expectations)
• Technical Risks (e.g., effectiveness, reliability, new technologies, standard protocols, R&D)

As you can see, there is a lot for organizations to think about relevant to risk when planning large-scale capital expenditures.  Fortunately, Deloitte’s capabilities go beyond simply listing the risks an organization must account for.  Deloitte has an “army” of leaders, skilled practitioners, industry specialists and game changers focused on risk management strategies.  Deloitte has developed models and identified key attributes for organizations to manage their risks, including:

• Organization and Governance: Leadership, standards, policies and defined team roles
• Business Process: Scheduling, work flow, reporting, project controls, and quality assurance
• Communication: Documentation, report dissemination, feedback, KPIs, progress tracking

Risk management is only a single aspect to successful capital project management.  Benefit analysis, quantifying project robustness, modeling and simulation, portfolio optimization, funding and defining strategic value are other key factors to large-scale capital project management decision making - factors you’ll see outlined in our Dbrief.  Successful risk management can facilitate successful project execution.  And in business, risk is not a game.

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Marlene Motyka
Principal
Deloitte Financial Advisory Services LLP Power & Utilities Leader

As used in this document, “Deloitte” means Deloitte Financial Advisory Services LLP and Deloitte & Touche LLP, which are separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.  Certain services may not be available to attest clients under the rules and regulations of public accounting.