I posted a series of articles on Projects @ Work around the 5 Questions a Project Manager must ask and answer for success. In that material there was a discussion of Buying Down Risk process. This is different than risk mitigation or other handling processes.
The concept of buying down risk starts with a little understood concept.
When the risk becomes and an issue and must be mitigated there is good chance there will be no time or money remaining to "handle" the risk.
The approach shown here is the make the risk go away before it becomes a issue and has to be handled.
In this example there is a risk that the weight of the vehicle will not be compliant with the planned weight at this point in the program. Each Technical Performance Measure has an upper and lower bound for its target compliance as the program moves from left to right. This is the very essence of emergence. On day one of the program it may not be possible to say exactly what the weight, or the MTBF (in the example below) is going to be sometime in the future. The program has to buy down the risk that this might not occur as planned.
The key here is as planned. For any credible Integrated Master Schedule to be in place, we must know the day and the cost to reach a pre-defined Technical Performance Measure.
This is the curse of many IT projects. The term technical debit is commonly used to describe the mortaging of the future from the failure of the past to show up on time, on budget and on performance specification.
So if we're outside the planned performance bands on the day we planned to be inside the performance bands, than we're late, over budget, and we can measure how far out of specification we are. With this knowledge, we CAN NOT say we are on budget and on schedule. If we're using Earned Value Management, we can't take credit for Cost and Schedule performance if we are not compliant with the planned technical performance.
So, Back to the Question
Buying down risk means spending time and money to stay inside the lines so we are not over budget, behind schedule and off specific, when it comes time to be on-budget, on-schedule, and meeting the performance measures.
Buying down risk is the same as having fire inspections to improve the likelihood that there will NOT be a fire in the warehouse. Not all risks need to be bought down, but for those that will cause your project to burn to the ground, it is advisable to make them go away before they become issues.
