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Risk management is how adults manage projects!

2/2/2012

8 Comments

 
10 Steps to Effective Risk Management

Risk Management is a fundamental part of a project manager’s job. It is an activity that needs to be attended to weekly – or sometimes even daily – and it is a discipline that really puts your proactive mindset to the test. Proactively identifying and mitigating risks means that fewer issues will arise on your project. It is always much easier to manage a risk than to wait until it becomes an issue. As Tim Lister and Tom DeMarco put it, "Risk management is how adults manage projects.”
 
The effective management of risks is all about being proactive; you need to identify and tackle potential concerns before they turn into problems.
 
Identifying, analyzing and managing risks is not a mechanical process to be carried out on a spreadsheet while sitting behind your desk. It is something you need to do in close cooperation with your team and stakeholders if you want to succeed. When you involve your team and stakeholders, not only do you improve the quality of the process, you also help promote a shared sense of responsibility for the project’s successes and failures.

The key to good risk management is to discipline yourself to take some time out on a regular basis – on your own and with your team and stakeholders – to assess everything that could impede the success of the project. You must understand the nature of each risk you identify and its potential impact and determine how to best deal with it. You also have to assign an owner to each risk and follow up on any agreed-upon actions to reduce the probability of the risk materializing. 
 
Clear your mind and take a high-level view of the project; Play out different scenarios in your head, and try to see the project from different points of view.

Also bear in mind that risks can be positive, and hence represent an opportunity rather than a threat to the project. You need to embrace opportunities by preparing a plan which supports them and exploits them. An example of a positive risk would be the opportunity to incorporate new technology that may become available during the execution of your project. 
 
The following 10 steps will help you to effectively manage risks on your project.
 
1. Create a Risk Log. Create a risk register for your project in a spreadsheet. Include fields for a unique reference number, date, risk category, description, probability, impact, owner, risk response, actions, and status. To download a template of a risk register, request access to the RESOURCES page.
  
2. Identify Risks - Brainstorm all current risks on your project with the project’s key team members and stakeholders. Go through all the factors that are essential to completing the project and ask people what is worrying them or what dangers they see. Identify risks related to requirements, scope, technology, resources, materials, budget, quality, stakeholders, suppliers, testing, rollout, business processes, legislation, and any other elements you can think of. 
 
3. Identify Opportunities - When you identify risks, also factor in positive risks - or opportunities; i.e. events that in some ways could affect your project in a positive manner. What would the impact be, for instance, if the uptake of your product was bigger than expected, or if it was delivered ahead of schedule? What could you do to exploit this opportunity and plan for it?

4. Analyze Root Cause - Explore the root cause of each risk you have identified by asking why, why, why. Knowing the root cause will make it easier for you to mitigate the risk and to identify the most effective risk response. 
 
5. Determine Impact - Establish the impact of each risk on time, cost, quality, scope, business benefits, and resourcing if it were to occur. Determine if the impact would be high, medium, or low. High impact could translate to: “would stop the project”, Medium impact: “would cause serious delays or rework”, Low impact: “would cause minor delays or rework”.

6. Determine probability – Establish if each risk has a high, medium, or low probability of occurring. High probability could translate to: “almost certain to occur”, Medium probability: “likely to occur” and Low probability: “unlikely to occur”. 

7. Determine Risk Response – Focus your attention on the risks with the highest potential impact and highest probability of occurring. Identify what you can do to lower the probability of each negative risk happening and to mitigate its impact in case it does occur. Where risks are positive, determine what can be done to increase their probability and impact.

8. Assign Owner - Assign an owner to each risk. The owner should be the person who is best placed to deal with the risk and monitor it. Let the risk owners know that you have assigned them a risk, and get their buy-in. Liaise with them and agree the actions that need to be taken and by when. 
  
9. Regularly Review Risks - Set aside time, at least once a week, to review your risk register and to monitor the progress of all logged items. Also schedule follow-up meetings with your team to identify new risks and to review previous actions and risk descriptions. Always pay the most attention to those risks that have the highest likelihood of occurring and the highest potential impact on the project.

10. Report on Risks - Ensure all risks with medium-to-high impact and probability are listed on your status report. Encourage a discussion of the top ten risks at the steering committee meetings so that executives get a chance to give input and direction.


If you liked this post, you may also like: 
8 Tips for Managing Project Costs
Become a Proactive Project Manager
10 guidelines for estimating project effort
Be a Project Champion

8 Comments
basskar verma
2/2/2012 20:42:44

Informative article !! As an afterthought would like to state that

In most of the projects it is not uncommon for risks to be repetitive in nature at different phases /stages in the life cycle of a project. The most important aspect would be a mechanism to re-cycle this information, LL or real time experience periodically so that it is put to effective use really.
It is not uncommon for resources to get carried out away over minute details or some critical step / outcome of risk events 'lost' due to attrition from the project team - invaluable info could be lost if not captured at every stage and re-cycled into the system so as to avoid a recurrence of known risks which is the worst situation to find one self in a project environment.Trust me , this is not uncommon.

To summarize:

If project resources possess a built in thought mechanism to address "worst case scenario" & at most minimum a "Plan - B" for all that they plan / implement in routine tasks / practices - it may be normal life or projects , "RISK IS RUSK' , it could be eaten and would crumble easily for most of the events - so it is more a case of mental adaptation really than trying to get overwhelmed about RISK, since after all "NO RISK , NO REWARD" is an obsolete phrase already.

Regards
Basskar Verma

Reply
Luke Winter link
17/2/2012 13:43:50


Susanne,

Insightful article. No matter how streamlined software developments can make the product development lifecycle in future, the need for quality PMs to effectively identify and trim risks will remain a critical part of a project manager’s job.

Luke WInter
Community Manager
OneDesk

Reply
Len Pannett
13/11/2012 10:39:30

Good reminder of the key steps. Quantitative assessment of risks is always a challenge, especially for intangible impacts. Use of qualitative-to-quantitative assessments are useful. First, assess the impact in terms of very high, high, medium, low and very low, then use these bandings to provide a guide on the impacts.

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Susanne Madsen link
13/11/2012 12:04:33

Thank you for sharing your thoughts. Please keep them coming :-)

Susanne

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check here link
19/6/2013 06:08:47

I love reading this article and guide about project management. The responsibility and concern of a project manager is huge and your article has helped understand it better. Thank you so much for the sharing and added more for the future postings. Good luck and keep posting!

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http://aseenontvstore.com/ link
20/6/2013 00:27:28

The strength of a project manager is the reduction of risk in business. Risk management plays key role in the successful running of any business or project. You article has provided informative description for precise analyzing of risk involved and thereby minimize the risk involved. Good job, keep posting more!

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STRAIGHTENING MACHINE link
22/7/2013 06:27:19

The most important aspect would be a mechanism to re-cycle this information, LL or real time experience periodically so that it is put to effective use really.

Reply
David link
15/2/2017 22:36:57

At points 5 and 6, "high, medium, low" doesn't do it for me. Give me numbers and then start making plans. What is the schedule risk, in numbers of days/weeks/months? How will abatement affect it? What is the probability of a risk event in % over a given period of reference, and again, how can we abate this? If you are not using numbers you are not doing risk management, you are merely engaging in a ritual.

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