Share with others We assume that the day will go as planned and that risks will not occur. These assumptions are mostly benign, such as the assumption that the weather report will be accurate or that no major calamities occur.
Projects are built upon assumptions. Without assumptions, it would not be possible to move forward. Some may have unexpected or even fatal consequences. Many times, the root cause of catastrophic failures can be traced back to poor risk management or flawed assumptions.
Although technicians raised questions about the design of the Hubble space telescope, they believed that the specifications were correct. Failures in test results were dismissed as the fault of the testing equipment. NASA program managers decided that the Challenger spaceship would be launched despite warnings from NASA about the possibility of O-ring seals failing in cold weather.
Assumptions & Risks
An assumption is an idea that is believed to be true but not proven. They are also a risk if assumptions are not validated.
Future events that are likely to occur and have an expected impact are called risks. There are two types of risks: opportunities (positive) and threats (negative). We often focus on the negative and neglect to see the upside.
Risks can be described qualitatively or quantitatively. Probability can be expressed in probabilities or with descriptive modifiers. For example, “the likelihood of rain is 75%” could be translated as “it is likely it will rain today.” The impact can be quantified numerically in days, dollars, or qualitatively (e.g. late, over-budget).
Frameworks are used to manage assumptions and risks in project management. Assumptions are recorded in the assumptions log. They are tracked, validated, and the results communicated. Risks are documented in the risk register. They are then assessed, addressed, monitored, and subsequently responded to. These practices will help you achieve better project outcomes.
Knowns and Unknowns
Most people struggle with defining assumptions without using the term “assume”. An episode of the Odd Couple TV series offers a humorous definition of assUme. Another example is Defense Secretary Donald Rumsfeld’s known unknowns press conference.
A matrix of what we know, and what we don’t know gives insight into assumptions and risk:
KnownUnknownKnownI know that!Assumptions and RisksUNKnownBias. BlindspotsPure risk. Unexpected.Known-Knowns are things we know with certainty. They are something we can count on happening. They are not risks or assumptions.
The known-unknowns can be either assumptions or risks.
Unknown-Knowns are things that we didn’t know we knew. These are blind spots.
Unknown-Unknowns exist outside our knowledge and are a source of pure risk.
Unvalidated assumptions should be documented in the assumptions log as well as the risk register. These risks can also be included in contingency risk reserves. These risks can be estimated using either expected monetary value or other valuation techniques.
The management reserves or buffer account for the impact of unknown-unknowns. Buffers are often percentages that are applied to the estimated cost and/or time. A home renovation project can cost more than the original budget, or take longer to complete.
Assumptions and Cognitive Bias
Cognitive biases are shortcuts that the brain uses to solve problems quickly. They are a systematic deviation from objective reality that is based on our perceptions. We create our perceptions of reality. We might see a sunny day outside and assume it to be warm.
Cognitive bias creates risk. They can be blind spots or unrecognized assumptions. We don’t realize our biases and fail to recognize them.
Anchor bias refers to putting undue weight upon the first piece information received. Project durations and costs are often compared with the imprecise, high-level estimates.