Thursday, February 20, 2014

What to do if Risk identified in between of Project?

What to do if Risk identified in between of Project?

Que. If new risk is identified in between of project and it has cost impact, Then client will be impacted on same ? How this situation get managed commercially with the client.

Ans. We have something called management reserves defined in project budget for unknown unknowns. That is nothing but reserved for unforeseen work that is within scope of the project.. If there is newly identified risk which impact cost means it is something which was unknown at the time of project initiation, planning and now some new work is to be done. We can make use of management reserves and take approval to update the cost baseline.
Answering your question - if there is something which is beyond the allocated management reserves, we may need to really look in details that new risk is really within scope of this project or the work this risk is triggering can be taken separately. Ideally management reserves are devised taking into consideration of size of project and probability of unknown unknowns can be reported for it and should be sufficient to address it

Que. Is defined management reserved get discussed with the client?
Assuming we mentioned 5% management cost reserved in pm plan and if that is not used till the end of the project , will it get benefited to client at the time of billing?

Ans. A lot depend on type of Procurement Contract Between these two parties.
a. Fixed Price, client has nothing to do with this, its a vendor responsibility to manage it , while vendor create budget for project ,he should take care of such risks
b. On time and Material or Cost Reimbursement, vendor has to make detail report on this issue and customer is the one who is going to pay the additional cost.

Regards
Kshitij yelkar
www.yelkar.com

Keywords : PMP , Risk identification, Project Management, management reserved
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