RISK MANAGEMENT: BEYOND DATA AND FACTS
Risk management often presents challenges, even for experienced professionals. This discipline, fundamentally based on facts, is also shaped by human experience, opinions and biases. In project management, complete factual information is rarely available at the beginning. Instead, project planning and implementation are initiated based on assumptions drawn from past experiences in addition to facts. Over time, these assumptions may either be validated or proven incorrect. When assumptions are falsified, they transform into risks, requiring risk mitigation plans. Therefore, it is essential to identify, assess and document these assumptions with the same rigour as risks throughout the project’s lifecycle.
Interplay between organisational and psychological biases
Understanding the relationship between facts, assumptions and project risks may seem straightforward. However, assessing project risks, or any risk, is complex due to the influence of individual and organisational biases. These biases, stemming from unconscious preferences and judgments, impact decision making and risk evaluation, leading to potential omissions and errors. Shaped by existing beliefs, opinions and experiences, biases act as filters in interpreting new information, often reinforcing pre-existing beliefs without critical evaluation.
Organisational biases, rooted in a company’s culture, values and dynamics, affect decisions at all levels. Organisational biases are embedded in collective behaviour and influenced by factors such as groupthink, shared assumptions and the normalisation of deviances. Cognitive or psychological biases are thinking patterns that do not follow rational judgement. These biases result from limitations in attention, memory, information processing and errors in our own personal reasoning. Both of these biases shape how individuals and organisations as a whole think and act. Management’s behaviour, institutional norms and policies impact organisational biases.
Jan-Mar 2024 Issue
Cimcorp Group