Risk Management

Introduction
• When you start the planning process for a project, one
of the first things you need to think about is: what can
go wrong? It sounds negative, but pragmatic project
managers know this type of thinking is preventative.
Issues will inevitably come up, and you need a
mitigation strategy in place to know how to manage
risks when project planning.
What Is Risk Management on
Projects?
• Project risk management is the process of identifying, analyzing and
responding to any risk that arises over the life cycle of a project to
help the project remain on track and meet its goal.
• Risk management isn’t reactive only; it should be part of the
planning process to figure out the risk that might happen in the
project and how to control that risk if it in fact occurs.
• A risk is anything that could potentially impact your project’s
timeline, performance or budget. Risks are potentialities, and in a
project management context, if they become realities, they then
become classified as “issues” that must be addressed with a risk
response plan.
• So risk management, then, is the process of identifying, categorizing,
prioritizing and planning for risks before they become issues.
• Risk management can mean different things on
different types of projects.
• large-scale projects, risk management strategies might
include extensive detailed planning for each risk to
ensure mitigation strategies are in place if project
issues arise.
• For smaller projects, risk management might mean a
simple, prioritized list of high, medium and low-priority
risks.
How to Manage Project Risk
• To begin managing risk, it’s crucial to start with a clear and
precise definition of what your project has been tasked to
deliver. In other words, write a very detailed project charter,
with your project vision, objectives, scope and deliverables.
• This way risks can be identified at every stage of the
project. Then you’ll want to engage your team early in
identifying any and all risks.
• Don’t be afraid to get more than just your team involved
to identify and prioritize risks, too. Many project managers
simply email their project team and ask to send them
things they think might go wrong on the project.
• But to better plot project risk you should get the entire
project team, your client’s representatives, and vendors
into a room together and do a risk identification session.
• With every risk you define, you’ll want to log it
somewhere—using a risk tracking template helps you
prioritize the level of risk. Then, create a risk
management plan to capture the negative and positive
impacts of the project and what actions you will take to
deal with them. You’ll want to set up regular meetings
to monitor risk while your project is ongoing.
Transparency is critical.
What Is Positive Risk In Project Management?
• Not all risk is created equally. Risk can be either positive
or negative, though most people assume risks are
inherently the latter.
• Where negative risk implies something unwanted that
has the potential to irreparably damage a
project, positive risks are opportunities that can affect
the project in beneficial ways.
• Negative risks are part of your risk management plan,
just as positive risks should be, but the difference is in
approach. You manage and account for known negative
risks to neuter their impact, but positive risks can also
be managed to take full advantage of them.
• There are many examples of positive risks in projects:
you could complete the project early; you could acquire
more customers than you accounted for; you could
imagine how a delay in shipping might open up a
potential window for better marketing opportunities,
etc.
• It’s important to note, though, that these definitions are
not etched in stone. Positive risk can quickly turn to
negative risk and vice versa, so you must be sure to
plan for all eventualities with your team.
Risk Management Plan Template

• To manage project risks throughout your organization,

it’s important to create a risk management plan. A risk
management plan is a document that guides the risk
management efforts of a team.
• It describes the potential risks of a project, the risk
mitigation strategies to respond to them, the resources
that will be needed and the reporting guidelines that
will be followed.
• have created a free risk management plan template for
Word you can use for all your projects.
Steps in the Risk Management
Process
• Identify the Risk
• Analyze the Risk
• Prioritize Risks & Issues
• Assign an Owner to the Risk
• Respond to the Risk
• Monitor the Risk
Identify the Risk

• You can’t resolve a risk if you don’t know what it is. There are many ways
to identify risk. As you do go through this step, you’ll want to collect the
data in a risk register.
• One way is brainstorming with your team, colleagues or stakeholders. Find
the individuals with relevant experience and set up interviews so you can
gather the information you’ll need to both identify and resolve the risks.
Think of the many things that can go wrong. Note them. Do the same with
historical data on past projects. Now your list of potential risks has grown.
• Make sure the risks are rooted in the cause of a problem. Basically, drill
down to the root cause to see if the risk is one that will have the kind of
impact on your project that needs identifying. When trying to minimize
risk, it’s good to trust your intuition. This can point you to unlikely
scenarios that you just assume couldn’t happen. Use a risk breakdown
structure process to weed out risks from non-risks.
Analyze the Risk

• Analyzing risk is hard. There is never enough information you can

gather. Of course, a lot of that data is complex, but most industries
have best practices, which can help you with your risk analysis.
You might be surprised to discover that your company already has
a framework for this process.
• When you assess project risk you can ultimately and proactively
address many impacts, such as avoiding potential litigation,
addressing regulatory issues, complying with new legislation,
reducing your exposure and minimizing impact.
• So, how do you analyze risk in your project?
Through qualitative and quantitative risk analysis, you can
determine how the risk is going to impact your schedule and
budget.
Prioritize Risks & Issues

• Not all risks are created equally. You need to evaluate the risk to know
what resources you’re going to assemble towards resolving it when and if it
occurs.
• Having a large list of risks can be daunting. But you can manage this by simply
categorizing risks as high, medium or low. Now there’s a horizon line and you
can see the risk in context.
• With this perspective, you can begin to plan for how and when you’ll address
these risks. Then, if risks become issues, it’s advisable to keep an issue log so
you can keep track of each of them and implement corrective actions.
• Some risks are going to require immediate attention. These are the risks that
can derail your project. Failure isn’t an option.
• Other risks are important, but perhaps do not threaten the success of your
project. You can act accordingly. Then there are those risks that have little to no
impact on the overall project’s schedule and budget. Some of these low-priority
risks might be important, but not enough to waste time on.
Assign an Owner to the Risk
• All your hard work identifying and evaluating risk is for naught if you
don’t assign someone to oversee the risk. In fact, this is something that
you should do when listing the risks. Who is the person who is
responsible for that risk, identifying it when and if it should occur and
then leading the work toward resolving it?
• That determination is up to you. There might be a team member who is
more skilled or experienced in the risk. Then that person should lead
the charge to resolve it. Or it might just be an arbitrary choice. Of
course, it’s better to assign the task to the right person, but equally
important in making sure that every risk has a person responsible for it.
• Think about it. If you don’t give each risk a person tasked with
watching out for it, and then dealing with resolving it when and if it
should arise, you’re opening yourself up to more risk. It’s one thing to
identify risk, but if you don’t manage it then you’re not protecting the
project.
Respond to the Risk
• Now the rubber hits the road. You’ve found a risk. All
that planning you’ve done is going to be put to use.
First, you need to know if this is a positive or negative
risk. Is it something you could exploit for the betterment
of the project? If not you need to deploy a risk
mitigation strategy.
• A risk mitigation strategy is simply a contingency
plan to minimize the impact of a project risk. You then
act on the risk by how you prioritize it. You have
communications with the risk owner and, together,
decide on which of the plans you created to implement
to resolve the risk
Monitor the Risk

• You can’t just set forces against risk without tracking the progress
of that initiative. That’s where the monitoring comes in. Whoever
owns the risk will be responsible for tracking its progress towards
resolution. However, you’ll need to stay updated to have an
accurate picture of the project’s overall progress to identify and
monitor new risks.
• You’ll want to set up a series of project meetings to manage the
risks. Make sure you’ve already decided on the means of
communication to do this. It’s best to have various channels
dedicated to communication.
• Whatever you choose to do, remember to always be transparent.
It’s best if everyone in the project knows what is going on, so they
know what to be on the lookout for and help manage the process.