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 Do’s and Don’ts of Risk Management Sections | PM Tools - PM Tools

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Do’s and Don’ts of Risk Management Sections

There is no better way to convince a potential customer that yours is the right company for the job than to demonstrate a true understanding of the risks the program will be up against and to come up with plans to mitigate those risks upfront. But in many proposals, the risk management section ends up as a missed opportunity to shine at best and a setback at worst. Rather than showcasing a real knowledge and understanding of the program and proposed solutions, the risk section falls flat or actually does harm.

It happens for two reasons. One reason is that many proposal teams fail to put enough time and consideration into developing a solid risk section. They assign one author to write it and then shift their focus to other work. What they do not realize is that great risk sections are usually born from hours of intensive brainstorming and input from every key player who truly understands the program. Instead, the process by which most risk management sections are written leaves little room for success. It is impossible for a single author to draw out and evaluate all of the program’s risks.

The second reason is that the wording of many risk statements fails to represent the company as an expert, and instead hurts the company’s chance of winning. Often risk statements tend to follow this train of broken logic: “If we fail to provide such and such (with “such and such” standing for something that is expected from any good company doing well in this line of business), this horrible thing will happen.” For example, “If no Customer Satisfaction Survey is established, there will be no feedback on Service Desk performance, which may lead to undetected systemic problems resulting in lower customer satisfaction.” Then, the risk mitigation strategy is to “Establish a Customer Satisfaction Survey.” This type of risk and mitigation statement reads like an exercise in shooting oneself in the foot. Essentially, it says to the customer, “If we do not know what we are doing and we fail to do what any decent company should do if it wins the bid, then we will fail.” Do not offer a risk like this and then couple it with a mitigation such as, “But we do know what we are doing.”

Consider another example where the risk is of “Equipment not identified early enough or critical equipment items not identified,” and the mitigation is something as rudimentary as “Ensure early identification of long-lead items.” Think about this from the standpoint of the customer. If the customer is choosing an expert logistics company, and one of your company’s key programmatic risks is that someone will fail to identify equipment in advance, what kind of image are you projecting?

The examples of “risks” cited above do belong in the proposal, but only as elements of the technical or management approach, and not as components of the risk section.

A good “do” for risks is to avoid representing as a risk anything that is within your company’s control as well as anything that any reasonably good company would do in this line of business. The kinds of risks you need to show in your proposal must be those external to the company’s own abilities to plan and manage the program well, or, in other words, those that are inherent to the nature of the job.

To drive this concept home, let’s use an analogy of a woman going through pregnancy and childbirth. Let’s say that there are things that educated pregnant women know to do to maximize their chances of success, such as going to the doctor for exams, not smoking, and getting good nutrition. Then, there are also risks that could possibly occur due to the nature of the process, such as any number of medical complications that are common to pregnancy and childbirth that could affect the cost (medical bills), schedule (carrying the baby to term), or performance goals (giving birth to a healthy child). If a woman were to put together a risk matrix for a proposal to become pregnant, documenting the risks of what would happen if she did not have timely medical exams or smoked would usually imply her irresponsibility. Documenting possible medical complications inherent to the nature of pregnancy, such as gestational diabetes, would demonstrate a thorough and thoughtful understanding of the risks.

There are only three categories of risks that should be presented in proposals:

1. Risks caused by lack of information or knowledge about the project that could only be gained in the process of project execution;

2. Risks caused by lack of control or resources to deal with external events or authorities; and

3. Risks caused by lack of time to complete tasks sequentially and methodically.

If a company is bidding to perform a project at a facility where no site survey has been completed, an example of a good risk statement would be that the “Existing facility is not large enough to support the required number of personnel for the Service Desk function, which could lead to inability to provide the required services.” The mitigation would then be identifying an alternative to the existing facility in case the survey findings confirm this risk instance. “Not getting environmental licenses and regulatory approvals in time because of the issuing agency’s notorious scrutiny” is another example of a well-identified risk. A good mitigation could talk about expert bodies, relationships with the regulators and local authorities, and the ability to design and build in accordance with every possible standard.

It is critical to remember that the only way to come up with solid risk and mitigation content is to collaborate as an entire team, rather than tasking a single author. Even if there is no requirement for a separate risk section, risk analysis is still all-important. Discussion of applicable risks and mitigation strategies also should be included in each section, to showcase your understanding of the job at hand. In your brainstorming session, it is a good idea to have a mediator who can point out the holes and flaws in your risk ideas. A mediator will also ensure that you avoid the pitfall of inadvertently stating as a risk that your company is unfit for the job, and then stating for the mitigation that your company is – go figure – fit for the job. Make your risk statements work for you, since they can be pivotal in convincing the customer that yours is the right company for the job.

Olessia Smotrova-Taylor is president of OST Global Solutions, Inc, a Washington, DC Metro Area company providing capture and proposal management support and training to companies seeking to win business. You can visit her website at www.OSTGlobalSolutions.com.
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