The Basics of Project Risk Management

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Mar 13th, 2015


There are project managers who verify dangers and issues to deal with, individuals who respond to occasions as they happen, and those who say, ‘What’s happened to my project?’ Supervisors who have neglected to oversee dangers and issues will be wilfully ignorant of their part in the catastrophe. All those much like a terrible driver whose carelessness causes a motorway pileup and who displays blameless wonder at the savagery unfolding in the back perspective mirror. No project management can run a smooth project even with detailed planning because of the fact that every project possesses inherent uncertainty. Therefore, risk management tool is required to anticipate and deal with these events. It is an approach to solve potential problems that can deviate a project from project plan. Further, it assists project manager to pinpoint weaknesses in plan.
A lot of research work and publications are done on risk management now. Organisations are embedding risk management tools and techniques in their undertakings and even Enterprise Risk Management is now studies. Not long ago, it was considered just a log or register used to fill in with impact and likelihood of events-if occurred-during planning or project initiation stage, but then put aside or hung to a wall. Nevertheless, organisations are now considering risk management a bit serious. Even authors argued that project management is risk management once it is executed.
The processes of risk management in its core are identification, assessment, action plan, and monitoring and control.
Identification:
It means identifying all potential threats that can deviate a project from its objectives or that can make it difficult to achieve certain goals. For example, change in law, a natural disaster in an area where project was planned etc. An experienced project manager and project team will identify risks without much effort. If the team and project manager had managed similar project then that prior experience would be valuable in working out potential risks during brainstorming sessions.
But there will be some risk that not so obvious. For that, it would be helpful to go through lesson learnt from previous projects and checklists.
Now you have identified risks associated with your project, you need something to organise information in a systematic way. Therefore, a risk log or register is required. One template is given in Brilliant Project Management book.
Log item name Description
ID A unique identifier (simply used as a reliable cross-reference)
Raised by The person who identified the risk or issue
Date raised The date on which the risk or issue was logged
Description A clear description of the risk or issue and its impact
Probability Probability score; the likelihood of a risk occurring
Impact Impact score; impact on the project of the issue or risk (if the risk occurs)
Score Risk score measure of the size of the risk (taking into consideration its likelihood and impact)
Action(s) The actions agreed to deal with the risk or issue
Owner The person assigned overall management responsibility and ownership for the risk or issue
Escalate Whether or not escalation within the organisation is required (yes/no)
Risk/issue x-reference Cross-reference where an issue has arisen from a previously identified risk
Open/closed Whether or not the risk or issue is current

Assessment:
Identified risks are then assessed to find out the impact over project objectives. This step helps in understanding and analysing risks in detail. Furthermore, the consequences of the risk over project goals required to achieve is also studied. Subsequently, information is provided to make an information decision. Risk score is calculated by multiplying probability of occurrence with impact if risk occurs. Otherwise, a simple scoring system given in Brilliant Project Management can be adopted, which is given below:
Probability of occurrence Project impact
Very unlikely Negligible
Fairly unlikely Minor
50/50 chance Moderate
Fairly likely Serious
Almost certain Disastrous

Action Plan:
After analysing and understanding risk in detail, action plan is devised to deal with it otherwise there is no point doing that hardwork. It could be fall back and do nothing if the risk is miniscule, mitigate, reduce, eliminate, share or transfer with another party. Sharing a risk with another party depends on contractual arrangement. One thing should be kept in mind is, not to share or transfer risk to that party that cannot bear it because at the end it will create problem for yourself.
You may have heard, “prevention is better than cure.” This approach is useful in risk management too. The best action strategy would be to prevent situation that give birth to risks.
Monitor and Control:
This step ensures that recommended action is actually implemented. In some cases, it was seen that certain actions were recommended in design of a product but recommendation remain on papers and nothing actual was carried out in practice. Thus, this step is necessary to close the loop of risk management.
To conclude, risk management plays a significant part in delivering projects successfully. Thorough understanding of this useful tool is necessary for project managers and organisations to find out their exposure to risks and methodology to mitigate these circumstances.

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