That's according to John Manfreda, a US-based expert in project and programme governance, risk and compliance and a lead IT auditor at a US utility.
He points out that as far back as 1995, the Standish Group estimated that even after the establishment of professional project management standards and practices, an unacceptably high proportion of projects (around 30%) are cancelled prior to completion and more than half completed projects will cost nearly double their original estimates.
While improvements have been made since then, the PMI's 2017 Pulse of the Profession research report - Success Rates Rise: Transforming the high cost of low performance noted that more than one in four (or 28%) of 'strategic initiatives' failed and 'undefined opportunities or risks' was among the top 10 contributing factors cited for project failures.
"These findings point out that improvement is needed in the project management profession. Defining and establishing a risk appetite level for a project is essential," Manfreda says.
In recent years, business risk management thinkers have introduced the concept of risk appetite which could be defined as the nature and extent of the significant risks an organisation is willing to take in order to achieve its strategic objectives.
"This definition is dependent upon an organisation's overall risk management policy, the industry or sector in which the organisation operates, and finally, management's view of risk taking," he adds.
A major problem, however, is that with the project management arena, determining a project risk appetite is often an informal and undocumented process. It is often dependent upon the individual work style and risk-taking perspectives of project stakeholders.
In the project management arena, determining a project risk appetite is often an informal and undocumented process.
John Manfreda
Manfreda maintains that utilising a more formal way to frame and document project risk appetite that aligned with project management activities would help project sponsors to both maximise goal attainment and minimise negative outcomes.
"The alignment of project management activities with project risk appetite can be a powerful tool to help illustrate and communicate the relationship between these two important areas," he said.
What is needed, he continues, is a way to drive the conversation between project management teams and project sponsors regarding a more formal assignment of project risk appetite and what related and relevant project management activities should be executed to support a successful project outcome.
He acknowledges that the process to define a project risk appetite would entail some difficult discussions regarding project success factors, prioritisation of goals and negative outcomes, and acceptable trade-offs in addressing items.
"However, the result of this action could be a more formalised approach to project risk appetite and the application of more relevant project management activities for a given project," he concludes.
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