According to a recent survey (by PwC), the number of major projects that could be defined as successful when assessed across the four critical dimensions of scope, cost, schedule, and business benefits was an astonishingly low 2.5%.  This incredibly small slice of the pie-chart indicates the compelling need for project planners, managers and teams to do better.

One reason why so many projects experience cost overruns and schedule delays is that project risk management techniques are not very relevant when it comes to managing uncertainty.  And uncertainty is what often drives project outcomes today.  What is the difference?

• A “risk” is characterized by an identifiable probability and impact.
• An “uncertainty” has neither of these; instead it might be best described as a scenario.

Consider the curves below. After many years of relative price stability, the basket of costs for large E&C projects experienced a point of inflection about 10 years ago.  Although the 2005 – 2008 period saw an explosion of activity and a commensurate rapid escalation in costs, it is interesting that, contrary to many owner’s expectations, the “great recession,” even with its large fluctuations in commodities, did not result in significant reductions in project cost nor did it improve productivity.

These curves illustrate uncertainty.  Who would have expected the cost of oil & gas production facilities to double in less than 4 years?  What will productivity look like in another 5 years?  These reflect uncertainty in that there are various scenarios that can impact a project, each of which reflects the result of numerous risks interacting in a particular way.

Instead of using risk management techniques, such as risk registers, it is a good idea to use techniques that focus on uncertainty.  One good approach is to develop optimistic, pessimistic, and most-likely scenarios and then stress- testing your strategy and plans against each one.  Using the above curves as an example, one could develop various scenarios about global economic trends and market activity, and evaluate how these might impact plans, economics, and strategy.  The conclusion might be that existing strategies and plans are sufficiently robust to hold up under most scenarios, or that contingency plans be made.  Careful monitoring of early warnings could then be employed to determine when it is time to activate these contingency plans. So, while uncertainty can never be eliminated, it can be managed using these types of techniques.