The Federal Report on the BP Macondo well disaster that killed 11 workers and caused a catastrophic oil leak into the Gulf of Mexico was released last week, and the conclusions are ugly.

According to an article on the report from Business Insurance.com:

“The blowout at the Macondo well on April 20, 2010, was the result of a series of decisions that increased risk and a number of actions that failed to fully consider or mitigate those risks,” the report said.

The investigative panel “found no evidence that BP performed a formal risk assessment of critical operational decisions made in the days leading up to the blowout. BP’s failure to fully assess the risks associated with a number of operational decisions leading up to the blowout was a contributing cause of the Macondo blowout.”

The report also said cost- or time-saving decisions made by BP “without considering contingencies and mitigation” contributed to the disaster, as was the energy company’s “failure to ensure all risks associated with operations on the Deepwater Horizon were as low as reasonably practicable.”

Once again, failure to properly assess and mitigate risk has lead to a catastrophic disaster for the people killed and injured, for the environment, and for the business responsible.

From the nuclear reactor meltdowns at Fukushima, Japan to the Macondo well in the Gulf, we are seeing the dreadful results of failure to assess and mitigate known risks.

What is the next avoidable disaster that is going to hit? And will we have to read another report about the failure to manage catastrophic-risk as one of the causes?

One excellent way to control risk in your project portfolio  while maximizing value is by using Optsee® in your project portfolio management program. Click on the link to watch the short video Winning the Lottery of Project Portfolio Management by Using Real Optimization (9:30) to learn more.

If negotiators are too friendly with each other, they’re more likely to misbehave, including lying or acting against the interests of their employers.

That’s the conclusion researchers from the Wharton Business School and Emory University published in “The Dark Side of Rapport” in this month’s Journal of Management Science. After carefully studying both face-to-face and online negotiations between participants under different experimental conditions, they found that:

“Negotiators who have a high level of rapport are more likely to behave unethically than are negotiators who have a low level of rapport. We find this effect holds both when high rapport results from the way in which negotiations are conducted (face-to-face versus computer mediated) and also when rapport is established through a brief rapport-building exercise before negotiations begin.”

The motivation for behaving unethically in high rapport situations can stem from the desire to maintain the high rapport by avoiding honest discussions about points of impasse. The researchers also found that unethical behavior in high rapport negotiations could be reduced by simply reminding participants that:

“…you would also need to live with the legal, social, and professional consequences of any decisions you make during the negotiation. Your success in future negotiations, your continued employment with the client you represent, and your reputation in the local business community – including your ability to get other jobs – could all be affected by the decisions you make as a negotiator.”

This simple reminder did not lower the level of rapport between negotiators nor did it affect the positive outcomes of the negotiations (reported by the authors as “satisfaction with the negotiation, trust, and willingness to work in the future with the negotiation partner”), but it did reduce the level of unethical behavior in both high rapport and low rapport negotiations.

Is it surprising to you that all it takes is a reminder to the negotiators that their actions and reputations matter?

If you’re negotiating project selection in a project portfolio, one excellent way to maximize your portfolio value while controlling costs, risks, and resources is by using Optsee® in your project portfolio management program. Click on the link to watch the short video “Predicting Project Portfolio Value Using Simulations” to learn more.

It was reported yesterday that a so-called “rogue trader” lost $2 billion at UBS. A BBC correspondent reporting on the incident wrote:

“The disclosure that it was [the trader's] decision to inform his colleagues of his actions that set alarm bells ringing at UBS, rather than its own monitoring system, will add to concerns that investment banks simply aren’t capable of controlling the huge risks that their traders take.”

If huge investment banks can’t manage and control the risks that their traders take, how well do you think non-financial firms are controlling the risks that their managers take?

Not very well, I think.

And I am not even thinking about criminal behavior. I am thinking about the billions of dollars wasted every year by companies that fail to manage, monitor, and control risks associated with project spending.

It isn’t that it can’t be done or that it is too difficult; it isn’t that it costs too much; and it isn’t that there is no return on investment for doing it.

The fact is that most managers simply don’t want to make the effort to learn how to do it properly. So they settle for using best guesses or weak and meaningless systems that are often worse than guessing. They just roll the company’s dice over and over again without ever trying to understand the odds.

And then they wonder why so many promising projects fail, just as I am sure that USB shareholders are wondering how their company could lose $2 billion by “rogue trading.”

By the way, if those billions in “rogue trading” bets had been successful, do you think the trader would still have been arrested?

One excellent way to manage project portfolio risk is by using Optsee® to maximize portfolio value while controlling costs, project risks, portfolio risks, and resources. Click on the link to watch the short video “Predicting Project Portfolio Value Using Simulations” to learn more.