Preemptive action: Mitigating project portfolio risks in the financial services industry is an Economist Intelligence Unit research report, sponsored by Oracle. It is based on interviews and research.

The paper draws on two main sources for its research and findings:

Volatile markets, weak demand and regulatory scrutiny have combined to create an environment in which financial services firms must execute projects flawlessly, particularly when those projects involve regulatory compliance. With many developed economies still struggling and regulatory requirements such as stress tests, Basel III and the Dodd-Frank Act demanding changes in financial services companies’ operations, the pressure to successfully execute projects is understandably high.

This demand for success has forced many firms to moderate their appetite for risk. In an effort to avoid depleting assets or damaging their brand, they are focusing solely on high-priority initiatives, such as meeting regulatory targets, while ignoring growth opportunities. When they do embark on new initiatives, the margin of error is smaller than ever.

Companies with the ability to execute their strategies more effectively than their competitors, however, have more opportunities. These organisations reduce the risk of failure by making every stakeholder accountable for project results, identifying risks of failure early in the project development process and responding to problems as they arise – before precious resources are wasted. Because these firms understand how to identify and deal with indicators of failure early in the planning process, they can safely invest in higher-risk initiatives, such as launching new products and acquiring other firms, without putting their reputations or bottom lines in jeopardy.

The experiences of financial services companies with mature project management capabilities to identify and deal with project failure provide valuable lessons to organisations with ineffective strategies. These include:

• Ideally, projects veering towards failure should be killed in the planning stages, not during implementation. Organisations that can identify signs of failure early on waste less money, deliver more projects on time and on budget, and make better use of resources.
• Executive stakeholders must be held accountable for project failures. When their success is tied to the success of their projects, executives will deal with problems as they arise, and ensure that their projects deliver the expected return on investment (ROI).
• Effective communication is essential in identifying signs of failure and finding solutions. In mature organisations, cross-departmental conversations occur among stakeholders to identify concerns at every milestone. This ensures that risks of failure are identified and dealt with early in the process.
• Regulatory projects are the top priority in the financial services industry today. Managing these must-do initiatives requires a balance between flexibility and adherence to process. While some organisations pour an endless stream of resources into these projects when they founder, mature project management organisations are able to refocus scope and add or adjust resources as needed to keep their projects on track.
• Effectively managing project failure opens doors to new opportunities. Financial services firms that understand how to reduce the chance of project failure can take calculated risks to expand their market share, acquire competitors, and gain a competitive advantage over their peers.