Exposing the Myth of Predictability

Abstract

This chapter shows that there are types of project risks currently not sufficiently understood and managed. There is a situation where too much attention is given to defining performance risks and too little attention is given to understanding organization and background risks. The traditional way of managing risk is focused on predicting the future more accurately to obtain less risk exposure. Yet, the industry still experiences major cost overruns and delays on mega-projects. This is in spite of a well-developed profession. The need for additional new solutions is discussed. Such solutions must take both strategic and contextual risk into account in addition to the traditional operational risks. Since strategic and contextual risks do not necessarily reduce with time, they have and retain significant uncertainty which can be expressed as volatility. The relationship between risk exposure and volatility provides a new way of looking at project risk.