Who Owns Risk?

Who owns riskThis is a guest post from Christine Sato

Proper risk management is vital to any project manager. Any big project is sure to have a great deal of risk, which needs to be identified and evaluated. The ability to accurately identify the risk factors and gauge the stakes of a given project is instrumental to proper management of that project.

It is safe to say that the management of risk is the job of a project manager, but who owns the risk? The concept of risk ownership is a tricky one, with a few potential answers.

Defining Risk

Risk, as it applies to project management, is any element of uncertainty in a project. This can take the form of negative risks, or threats, and positive risks, or opportunities. Among these risks are known risks which can be planned for, and unknown risks which require adaptability to manage.

The project manager is responsible for risk management, which entails identifying the positive and negative risks, planning for known risks, and quickly adapting to unknown risks as they arise. They usually have the final say in risk management, but they can delegate some aspects of the risk management process through assigning owners to risk.

Project Management and Risk Ownership

Risk ownership, as it applies to project management, is mostly about assigning portions of risk to individuals. When these individuals are delegated ownership of risk, it doesn’t literally mean they own the risk; that would be the organization or individual that provides the capital. Rather, risk owners, as delegated by the project manager, are usually those who have intimate knowledge of the risk in question, and have a large amount of influence over its outcome. The ‘ownership’ in this definition of risk ownership means that they must own the consequences of the risk, meant in the same way that one owns their mistakes.

Aspects of Delegated Risk Ownership:

  • Identifying threats
  • Identifying impact
  • Assigning responsibility
  • Implementation of risk response
  • Reporting risk
  • Identifying risk interdependence

Bearing Risk Vs. Owning Risk

The literal owners of risk, the ones who financially back the project in question, are referred to as risk bearers instead of risk owners. The risk bearers could be the board of directors, an individual entrepreneur, angel investor, or other financial backer. Since these individuals are the ones bankrolling the project, they can be said to literally ‘own’ the risk, and will usually have the final say on any decisions made by the project manager. However, for the purposes of project management, these individuals are referred to as risk bearers, with the ones managing the risk being risk owners. In some cases, risk bearers can also be risk owners: for example, a member of the board of directors can be assigned ownership of one aspect of risk by a project manager.


Risks are part and parcel of any serious undertaking. Any business project is a roll of the dice, and the project manager is responsible for weighing the odds. In this aspect, risk ownership can be defined in three ways, with three groups of risk owners. Individual team members own specific aspects of the risk, requiring them to accurately monitor and mitigate them. The suppliers of capital and resources literally own the risk, seeing as they are the ones with the most at stake.

Lastly, the project manager has the most important role, owning risk as the final say in the risk-making process. They are responsible for taking the input from individual risk owners, weighing it against the desires of the risk bearers, and owning the final consequences of their decision.

Christine Sato founded the site CPA Review Courses – an online resource dedicated to helping professionals pass all four sections the CPA Exam on their first try. Christine provides cpa review courses and guides and gives expert cpa study tips in order to ease the process of becoming a CPA.


Guest Post: The Leadership Theory Lack

This is a guest post by David Burkus, Editor of LeaderLab.org. David and LeaderLab has just released their new book titled The Portable Guide to Leading Organizations – jump over to LeaderLab.org and learn more.

Airport bookstores are crowded with books on leadership, and each one seems to promote a “leadership lack.” They’ll each begin with phrases like “The most pressing issue in organizations is that leaders lack integrity…or empathy…or strategy…or even humor. These books continue by laying out the author’s simple framework for developing the perfect leader. On and on the dialogue goes to the point where readers become be confused because the 21 Unassailable Edicts of Leadership are different than the Seven Routines of Really Efficient Leaders.  It would be a poor move to add to this confusion. With this in mind, we will admit that we do not believe our “leadership lack” to be the most pressing issue in organizations, just the easiest to fix.

Leaders lack an understanding of leadership theory.

These airport leadership books provide decent advice that is easily digestible. And because it is easily digestible, leaders continue to gorge themselves on it until there is very little room left for real, solid theory. Most see theory as complex and hard to digest. When leaders think about leadership or organizational theory, they think back to the 400+ page textbook they had to buy in business school. “Seems like quite an undertaking,” leaders think. So they cheerfully hand their money to the cashier and board the plane with the latest, pocket-sized “leadership” book.

Leaders lack an understanding of leadership theory because it isn’t presented in pocket-sized form.

But leadership theory isn’t some kind of rocket surgery. Attaining a true understanding of theory isn’t difficult, if it’s presented right. We’ll survey the major leadership theories. Our intent is to present them in the same easily digestible, pocket-sized form as the airport bestsellers.

Why Theory?

During WWII, Allied bomber losses were high, so high that the British Air Ministry undertook a rigorous analysis in hopes of finding a solution. Their engineers set out to eyeball every bomber they could, gathering data on each bullet hole. After analyzing the results, engineers decided to reinforce the areas that had the highest concentrations of holes with armor plating.

It didn’t work.

Perplexed, the engineers assumed that the extra plating had made the planes too heavy, and that the difficulty in handling the planes was offsetting the protection of the armor plating.

Enter Abraham Wald.

Wald, a mathematician, suggested that they simply put extra armor plating where the bullet holes weren’t. The idea was simple: if the planes are returning with bullet holes, obviously those areas can be struck without causing the planes to crash. The planes that weren’t returning, Wald theorized, are the ones that are getting hit in different areas. The engineers’ error was so significant, statisticians decided to name it: survivorship bias (the tendency to include only successes in statistical analysis). Any time you only examine just the successes, you will skew the results.

If we return to the airport bookstore in our minds, we see the shelves littered with survivorship bias. We love reading about successes. That’s why books by celebrity CEOs and leadership gurus are among the best sellers of any list. We’d much rather read about the brilliant company leader who started working out of his garage and ended up dominating the industry. However, when this is all we consume about leadership, we succumb to survivorship bias. While a celebrity CEO may reveal the secrets he used to climb to the top, how are we to know they work in every situation?

This is where theory comes in.

Leadership and organizational theories are constructed and tested by examining not just the successes but also the failures. Good and bad leaders, successful and failing change efforts, all get included in the analysis and the resulting theories spare us from our survivorship bias. If we want to grow into outstanding leaders, we must know how and when to utilize the knowledge provided by the existing body of leadership research.

Good leaders focus on where the bullet holes are; great leaders consider where they aren’t.

Guest Post: Personality Assessments by Jurgen Appelo

Management 3.0 by Jurgen AppeloThis article is an adaptation from a text out of the book “Management 3.0: Leading Agile Developers, Developing Agile Leaders,” by Jurgen Appelo. The book will be published by Addison-Wesley, in Mike Cohn’s Signature Series, and will be available in book stores near the end of 2010.

As a manager you need diversity in your teams. A diversity of personalities stimulates stability, resilience, flexibility, and innovation. On the other hand, there must be sufficient common ground among team members to ensure cohesiveness, and for them to be able to resolve conflicts. But how do you know if a team is both diverse and cohesive enough? Enter personality tests. There are several ways to assess people’s personalities:

The Sixteen Personality Factor Questionnaire is a tool developed by psychologist Raymond B. Cattell. Empirical research has confirmed that this model, which distinguishes between 16 personal traits, is useful in predicting a person’s behavior in many settings. It provides an integrated picture of an individual’s whole personality. My suggestion is to have a look at the 16PF model when you are most serious about personality tests, and when people have sufficient time available to do the tests.

The Myers-Briggs Type Indicator (MBTI) assessment is the most widely used personality assessment tool in the world, though its effectiveness has been disputed in scientific circles. The MBTI model sorts a number of psychological differences into four opposite pairs (Extraversion vs. Introversion, Sensing vs. Intuition, Thinking vs. Feeling, and Judging vs. Perceiving.) The model is sometimes accused of suffering from the Forer Effect (people believing that statements reflect their personality, while in reality they apply to almost everyone). I would advise you to consider this test if you care more about people’s enthusiasm than scientific justification. The results are fun to discuss, and they enable easy comparisons, if you don’t take the results too seriously.

The Enneagram of Personality proposes nine personality types, represented with a nine-pointed diagram in a circle. It is said that the tool is an effective method for self-development, though it is sometimes criticized for not being falsifiable (meaning it is unscientific), and accused of having its roots in mysticism. Nevertheless, such a test can be fun to do with a team. And if team members are reluctant to have their personalities assessed scientifically, then this unscientific Enneagram can be a welcome compromise. A bit of relativism and a good laugh are worth sharing with team members, even if it’s only to stimulate team growing and awareness of differences.

The last model in this list is the Big Five Factors of personality. It’s a model that consists of five personality traits (Openness, Conscientiousness, Extraversion, Agreeableness, and Emotional Stability), and it is considered to be the most comprehensive model available, providing a conceptual framework that integrates all earlier findings and theory in personality psychology. However, a common complaint about the Big Five model is that it is too high level to be useful. Several studies have confirmed that models of lower-level traits, like 16PF, Myers-Briggs and the Enneagram, can be more powerful in predicting actual behavior of people. But they are also more controversial than the Big Five, which is seen as the first (and only) scientific consensus in personality psychology. The Big Five model is a great choice if you want a personality assessment that is scientific in its approach, like the 16PF model, but that doesn’t dig too deep. This could draw in some people who would otherwise feel uncomfortable about such a test, or who lack the time to do a full 16PF assessment.

Four Steps Toward Team Personality Assessment

There are four things you can do when assessing diversity and coherence of personalities in software development teams.

First of all, take the tests yourself. Get to know yourself. When you understand your own personality, you will better understand what kind of manager you are, and how you are likely to be perceived by your teams. For example: the tests showed me that I’m very interested in high-level analysis of ideas, patterns, and designs, and usually not very concerned with pragmatic little rules and details. This means I could be a weak manager when a team is uncaring of daily discipline, orderliness, and cleanliness. And I might have too little patience for (and too much criticism of) other people’s solutions.

Second, share your own test results with your teams. Show them what they can expect from you as a person. When you are secretive about yourself, you can expect team members to be secretive towards you. And you don’t want that, I’m sure. So don’t be coy, and show them your strengths and your weaknesses. Yes, this takes some courage. You harden yourself by exposing your vulnerability. You want people to respect and trust you. Openness and honesty will achieve exactly that (and much more besides).

Third, ask team members to do a personality test, privately. There are plenty of free tests to choose from on the Internet, but you can get more elaborate and professional test reports when you are prepared to pay for them. It is not unreasonable to require that team members understand themselves. When they know their own strengths and weaknesses, they are in a better position to behave accordingly. And as a manager you earn some extra points when you show them that you’re willing to invest in their self-development.

Now, you can stop here. It’s great when you know yourself, the team members know you, and the team members know themselves. You will have solved 75% of the team personality issue, which may be enough for your situation. On the other hand, you might want to go for the full 100%…

Fourth, you can suggest that the team members share their results with each other. This can only be done voluntarily, and only when there’s a high level of trust in the team. Naturally, you will have preceded this question by giving them your own test scores, so they know what to expect, and might be more willing to follow your lead. Arrange a meeting in a warm, relaxed, non-threatening atmosphere, and have team members talk freely about their test results. Emphasize that scores are not meant to be good or bad. One cannot be both left- and right-handed at the same time, and neither can someone be both shy and bold, or grounded and abstracted. And even if people don’t really care for the personality models, which, it must be stressed, are not without controversy and dispute, the exercise itself can be a great way to do some team growing.

When team members better understand each other’s personalities, they (and you) will be able to identify any deficiencies in diversity or cohesiveness in the team. And you can discuss what to do about that.

One final note: Some states and countries restrict the use of personality tests by employers, though the legal restrictions are usually directed at employers requiring such tests in the process of hiring new employees. You may want to check this first for your situation and legal environment.

This article is an adaptation from a text out of the book “Management 3.0: Leading Agile Developers, Developing Agile Leaders,” by Jurgen Appelo. The book will be published by Addison-Wesley, in Mike Cohn’s Signature Series, and will be available in book stores near the end of 2010.



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guest-postI’ve got a tight timeline on a research project. I’m working on a paper to submit for an Conference on IT Project Management…fun!.  Because of this timeline, I’m not going to have as much time to put some posts together for the next week or so….so I thought I’d open it up to you and see if there is any interest in sharing your thoughts with my readers & subscribers.

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