What Role does the Project Sponsor have in Risk Management?

( http://projectgazette.com/ ) I was recently asked about the responsibility of the project sponsor when it comes to the risk environment. Most project managers know the role of a project sponsor, but do they understand the sponsor’s role when it comes to the risk environment?

Project sponsors are the owners of the project. They are the ones that identify and define the project deliverables as well as the “fit-for-use” quality of the deliverables. The project manager’s role is to ensure that the Project Team completes the project within the constraints of the project charter. The Project Manager develops the project plan with the team, and manages the team’s performance on project tasks. The Project Manager is also responsible to secure acceptance and approval of deliverables from the Project Sponsor and Stakeholders. The Project Manager is responsible for the project to be delivered on budget, on schedule, and within scope while managing the risks involved.

A concept that most Project Managers miss is the understanding of who really owns the risk environment of the project? It is the sponsor that sets the risk environment based on their given expectations and desires for a successful project outcome. Thus, it is the project manager’s role to respect and implement these expectations. The sponsor determines the risk nature or risk tolerance of the project by defining the project’s risk profile. The sponsor through the risk profile and their project funding decisions therefore, sets the “project risk norm.”

Since the project sponsor sets the project risk norm, only the sponsor can authorize modifications to the project constraints (scope, time, cost, quality, and risk.) It is the sponsor that is asking others to accept additional risk not the other way around.

If the project sponsor through a formal change management process has agreed to consider a change in the project’s constraints, a project manager should assist the decision making process by subjecting all project constraint changes to a formal impact analysis (based on the size, complexity and visibility of the project profile.) Such impact analysis will address the issues of project equilibrium or balance that must be maintained given any change to the project’s initial charter or business case.

The change management documentation should include impact analysis of the primary constraints: scope, time, cost, quality and risk so that the requested change can be properly assessed as to its effect on the current project environment. All subsidiary plans of the Project Management Plan and project business case or charter must be reevaluated to determine if the proposed changes are compatible with the initial project’s constraints, or if the changes being requested are best handled via a subsequent project or cycle.

 

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