Simple Project Risk Management

by admin on February 20, 2009

You will find many definitions of risk management available and I don’t intend adding another. But in a project management context, risk management is a way of managing the uncertainty around your project.

A risk in its simplest form is something that may happen and may have a positive or negative impact. But most people when undertaking risk management focus on negative risks – I guess positive risks are a bonus if they happen. If we accept that things will go wrong on projects (and they do!), it certainly helps to have a structured approach. So in a nutshell, here are the key steps:

Identify your risks. Figure out the things that could have a negative impact on your project. For example “no resources”. Don’t just copy the same risks from your last project risk log - I know some risks will probably be the same across most projects. But spend the time figuring out what could go wrong on this project.

Assess your risks. Here you are capturing some factors against the risks. Typical factors captured are probability (how likely is it to happen) and impact (how big a problem will it be). Some people use 0-100 or high/medium/low. It can also be useful to capture a financial impact if it happens.

Define a response for your risks. This is the fun bit – figuring our how you intend to deal with the risks. Here are the typical risk responses.

  • Avoid the risk. Do something to remove it. In our example above, this may be to reduce the amount of work in the project. Therefore the risk can’t happen as there are plenty of people to do the work.
  • Transfer the risk. I like this one – make it someone else’s problem. So in our example above we could transfer some of the work to a supplier.
  • Mitigate the risk. Do something to lessen the likelihood of it happening or the impact if it happens. So in our example above we get an overtime agreement in place from our resources.
  • Accept the risk. Pretty obvious this one. Do nothing – the risk may have such a small impact it is not worth worrying about.

Most of the above will be captured in a risk log. In you take a look at iPlanWare PPM you will find we have a risk log built into the product which automatically ranks projects by risk level. Far better than using a spreadsheet.

Once you have your risks in place you can then start doing meaningful analysis over your project portfolio. For example which are our most risky projects? What would be the financial impact if the most probable risks happened?

So why do risk management?

  • It is not difficult to do and will have a positive impact on your project outcome.
  • Identifying the most risky projects means you can zone in on those projects at each review cycle.
  • You avoid the “no one told me” culture.
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