Risk management plays a critical part in the planning phase of a project. Determining and assessing risks that may arise during the execution of a project takes critical thinking and anticipation skills. Once the risk is assessed and evaluated using Failure Mode Effects and Criticality Analysis (FMECA), the risk must be managed, meaning the team in charge of risk management must find a solution. Managing the risk comes down to one concept really - risk vs. reward. Certain methods, like the FMECA, can be used to analyze the risk, but often times it ends up being a judgement call of whether or not the risk outweighs the reward, and vice versa. In your personal experience, what are some examples of risks that have been deemed too dangerous, resulting in the cancelation of a project, and what are some examples of risks that have been accepted, with the project team willing to take the risk in order to complete the project?
As I do not have any experience to share here, I would like to discuss a few new terms related to the topic.
The tendency of an organization or group to take risks in a given situation can be termed as risk appetite. For a project, the project itself is the situation and the project objectives are the objectives to be achieved. The major influence on risk appetite in a project is the culture of the team or organization with regard to risks and is known as risk culture. Risk thresholds have to be checked against the risk capacity of the organization. We could conclude that our appetite for risk is leading us to set risk thresholds that exceed our capacity to take a risk and reduce the threshold or vice versa. The chosen response to risk influenced by perception is termed risk attitude. Risk attitude can be modified and managed which is not the case with risk appetite.
A four-step process known as the Risk Appetite-Risk Attitude (RARA) model is used by some projects to set proper risk thresholds for a project. This pipeline is relatively new (recent research by Hillson & Murray-Webster) and provides us with a simple and practical way to set risk thresholds at a level that will enable us to take the right risks safely.
Sadly, I do not have any experience working on projects where I had any knowledge of the risk/reward relationship. My main knowledge on the topic though is built from times when risk vs reward calculations failed and became larger scale ethical issues. The main example that comes to mind is the controversy from the Ford Pinto. The case is known for an infamous cost-benefit analysis that found the cost to Ford for modifying the design of the car to greatly outweigh the estimated amount of damage the modifications would prevent. Because this is not an ethical discussion I won’t further that conversation but the point I wanted to make regarding risk vs reward analysis is that it can only be done with estimations and should be very clearly understood by everyone involved in deciding if a project is worth continuing with.
So after a lot of thought I just realized that there was recently an example of a high risk high reward scenario. Not to long ago there was a group of people on reddit that decided to pull one of the greatest stock market scandals. The goal was to get as many people as possible to purchase one specific stock to cause a huge growth in the stock's value. They targeted GameStop as the stock of choice. After putting a lot of money into it they successfully drove the stock up about 1000%. This drove many rich stock market sharks to lose money helped many ordinary individuals gain a huge income off of one purchase.
The risks I've personally seen deals with both sustaining of products as well as seeing a remediation for a product has failed in the field.
For sustaining projects, the project has been launched and there may be a few complaints or manufacturing changes or project updates via line extensions that always have a few inherent risks. These risks are based on the data that was submitted to the regulatory body where your product must be within a certain level of similarity (using statistical comparisons with data driven rationales) that can pose a threat if you were to retest product for a direct comparison with another line. If a new worst case forms, then you would need to resubmit to the FDA and hope that there aren't any other implications based on those projects. Some projects need to be heavily scrutinized where there are times that manufacturing change may not go through.
For a project that has recently failed in the field, there is a huge risk if the product has enough concern for recall. Even if the company has spent millions of dollars with large amounts of time dedicated towards the product, they must make the judgement call to either fix all issues related to the product or fully recall the product and remove it from saleable product. The problem with removing it from the market is that surgeons or customers may lose trust in the company due to the engineering based issues. Confidence in the product is something that drives the market in medical device where its a risk to just stop production of a new product with a large interest generated during pre-market activities. There is also a risk on trying to fix all the issues with a product where, unless the project team is still working on the same project, many people get resourced towards other projects where there is now another risk of losing priority on remediating the product that is under heavy scrutiny. I've seen the latter occurring and it can be a nightmare on a more complex product with many of the engineers who dedicated huge amounts of effort leave the company or move to a different role.
In September 2017, I traveled to the state of Florida in support of hurricane Irma disaster relief efforts with the American Red Cross out of the greater New York region. I volunteered in the mass care department which is responsible for sheltering, feeding, bulk distribution of emergency supplies and medical equipment, and reunification of families. One of the areas we visited and provided medical relief and aid to was severely affected with eight people who died in the complex including two infants. I felt a calling to assist our fellow Americans in their time of need in the wake of this tragedy. It was a heart wrenching experience but having been through that I’m confident that serving communities especially after disasters have taken place it is a humble reminder that service to those in need is part of a broader recovery process. The project was risky in a sense that we had limited food and supplies even for ourselves compounded by the disaster that took place, but the project need to occur for the benefit of those we serve. The reward was knowing we were able to deliver the much needed resources across the state to over fifteen hundred families, a risk we knowingly embarked upon as a team despite the danger in disaster conditions. I would do it again in a heartbeat.
So after a lot of thought I just realized that there was recently an example of a high risk high reward scenario. Not to long ago there was a group of people on reddit that decided to pull one of the greatest stock market scandals. The goal was to get as many people as possible to purchase one specific stock to cause a huge growth in the stock's value. They targeted GameStop as the stock of choice. After putting a lot of money into it they successfully drove the stock up about 1000%. This drove many rich stock market sharks to lose money helped many ordinary individuals gain a huge income off of one purchase.
Hey @asg49njit-edu, this was a great point the GameStop and AMC stocks going up drastically after the discussion of a group of people on Reddit really just goes to show how far a plan can take you when you communicate and have everyone on the same page. Investing in that stock after it had been shorted for so long is obviously a risk but the response of the people outweighed the odds and proved to be a substantial reward to any one who placed an investment. However, one risk that was unable to be foreseen was Robinhood, an investing app that lets normal people invest on public stocks, and their betrayal of their uses to appease the stock market sharks.
Working in the industry has taught me that most projects that are associated with high risk will take time and resources to mitigate that risk. In many instances, low risks are often accepted. For example, one of the projects I was working on involved a foam insert. Part of the cut-out of the insert was a little too big for the devices, causing there to be some room in the insert. This was deemed a low risk and the team accepted it because due to the conformation of the device and the insert placed on top, one area small area where the insert was a smidge too much cut was not going to affect the product. To ensure this, the product was tested and the results identified that the risk associated was not a high risk; therefore the team chose to accept it as is. I have also had an example where the risk was too great and the project was canceled. It involved a CE mark missing, which was a regulatory requirement. It was determined that the absence of the CE mark would affect regulatory regulations and therefore can cause more harm than good, so the incoming batch of parts was immediately scrapped and the project was closed out. There are areas in which the impact is not substantial thus making it a low risk, which can be accepted. And there are areas where the impact can have many negative outcomes, classifying it as a high risk, which causes the project to be canceled and the parts to be scrapped.
In project management, risk vs. reward refers to the relationship between the potential benefits of a project and the potential risks associated with it. In other words, it involves weighing the potential gains against the potential losses. I believe to effectively manage risk vs. reward in a project, project managers must carefully evaluate the potential risks and rewards associated with the project and develop a risk management plan. This involves identifying potential risks, assessing their likelihood and impact, and developing strategies to mitigate or avoid them. Ultimately, the goal is to balance the risks and rewards in a way that maximizes the project's potential benefits while minimizing the potential negative impacts. This requires careful planning, ongoing monitoring, and continuous evaluation throughout the project's lifecycle.
Unfortunately I do not have experience with risk vs. reward in the project management field. From an athlete perspective I have seen several instances where us athletes risk our body for a greater reward. For example, I was given an extra year of eligibility due to covid-19. Although my knee was not in the best condition and needed rest I decided to come back for my 5th year to assist my team as the veteran. Thankfully I did not end up with a major injury and my team was able to win ECAC Conference Championship. Everything worked in my favor and for me the reward was able to outweigh the risk.
Some athletes are not as lucky as me. One of my teammates had already received an ACL reconstruction surgery prior to joining our FH team. Although the experience was memorable she ended up tearing her ACL again and spent half her career in rehabilitation. Since her risk always seemed to outweigh the reward she ended up not coming back for a 5th year. That could be an example of canceling a project due to the risks.
In my academic experience I have only ever experienced one risk that needed to be taken to complete a project. This situation arose in my senior capstone project. For this project we needed to design a device that would assist a surgeon during total hip surgery by lift the femur during the stem insertion phase of the surgery. In the team's theoretical calculations, the device would experience a bending moment much higher than a specification that was given for an actuator we were looking to purchase. Unfortunately, there was another actuator that could experience that theoretical maximum forces, but that actuator would not ship in time. In order to complete the project on time, we needed to risk purchasing the initial actuator, which was expensive, and risk it failing due to the high moment it would experience during lifting. Luckily, the risk paid off as the actuator did not break while holding the tested femur weights the device needed to lift. This risk could have very much cancelled a project in real life circumstances, however we had no choice but to accept the risk and it luckily worked out.
