As a Project Manager, mitigating project risk is an everyday activity that forms the crux of every role. It is critical within this role to be able to forecast, factor or be able to alleviate project risks, that should they occur on any project, the necessary steps have been put in place to alleviate the negative impact on the overall project objectives.
Whether or not we choose to recognise it, risk is an integral part of each and every project we undertake. The following 5 steps are a basic understanding of the management of risk in a project:
Step 1: Plan
From the outset a Project Manager needs to define how to manage business risk. This could be encapsulated in a risk management plan, a risk management strategy or even simply assembling a checklist of how the business would control risk in any of their projects. As a Project Manager, a documented risk management plan will be created to define certain risk approaches. This is a reference tool provided to the business as Best Practice standards moving forward.
As a guide what this can entail is outlining:
- The company’s risk management procedures that define how each steps will operate
- The risk tolerance threshold
- Tools or techniques to be used
- Risk categorisation and severity
- Identifying your record keeping requirements
- Roles and responsibilities outlined of each stakeholders
- A contingency outline of risk budget
Step 2: Identify
Following the processes and procedures defined in the previous step, the role of the Project Manager is to then define what risks may affect the project and documenting such characteristics. This will be logged in a risk register for subsequent management control and visibility. A clear expression of each risk is logged with its cause, the likely event and the effect the risk could have on the project. This is part of a repetitive process where the timings and escalation requirements are reviewed and defined in the risk management plan.
Step 3: Analysis
In order to determine which of the identified project risks require subsequent management – an analysis of the threats and opportunities is required to be undertaken in a form of assessment. It is worth considering project risk analysis in two ways, qualitative risk analysis and quantitative risk analysis.
Qualitative analysis prioritises project risks for follow-up assessment by combining the probability of occurrence and the risk impact. The latter is where a score or weight is assigned to each risk based on probability and potential impact the risk can have on the project, highlighting whether further management is necessary. The risk register is updated with these results.
Step 4: Response
Risk response planning takes the evidence collected to date from the risk register and for each threat and opportunity that has been identified as falling within a certain range of risk tolerance threshold, a Project Manager will determine one or more viable risk responses.
This means developing options and actions that will enhance opportunities and reduce threats to project objectives. A response plan is subsequently embedded within the project plan and can then be actioned as appropriate. The plan than increases the probability and possibly impact of opportunities identified within the tolerance range, and reduces the impact of any threats.
Step 5: Monitor and Control
Throughout this process a Project Manager is continually alert to identifying risks, monitoring risks and executing appropriate response plans.
If threats are not identified early and actioned accordingly this can have detrimental effect to the overall project objective and the business bottom-line.
A Project Manager’s role is to manage risk within their projects in a systematic manner. By doing so they are required to ensure threats have a reduced effect on the project outcome, whilst at the same time improving the likelihood of gaining from certain opportunities along the project life cycle.
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