PRoJECT RISK MANAGEMENT

Project Risk Management

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Project Risk Management

Some experts say a strong risk management process can decrease problems on a project by as much as 90 percent. In combination with solid project management practices — having a well-defined scope, incorporating input from the appropriate stakeholders, following a good change management process, and keeping open the lines of communication — a good risk management process is critical in cutting down on surprises, or unexpected project risks. Such a process can also help with problem resolution when changes occur, because now those changes are anticipated and actions have already been reviewed and approved, avoiding knee jerk reactions.

Defining “Risk”

Before one can embark on a risk management process, one must have a solid understanding of some key definitions. Project risks as defined from a PMI perspective are, at their core, unknown events. These events can be positive or negative, so that the word “risk” is inherently neutral. That said, most of the time and focus is spent handling negative project risks, or “threats,” rather than positive project risks, or “opportunities.”

often, companies that do perform a risk management process on a fairly typical multi-month project (no longer than 12 months) will identify and manage possibly five to ten easily recognized project risks. However, that number should in fact be much higher. With a high number of project risks identified early on, a team's awareness of what to look for is increased, so that potential problems are recognized earlier and opportunities are seen more readily.

It may seem that project risks cannot be managed without taking away from the actual work of the project. However, this can effectively be accomplished with a seven-step risk management process that can be utilized and modified with each project.

The Risk Management Process

Step one of the risk management process is to have each person involved in the planning process individually list at least ten potential risk items.

Step two of the risk management process is to collect the lists of project risks and compile them into a single list with the duplicates removed.

Step three of the risk management process is to assess the probability (or likelihood), the impact (or consequence) and the detectability of each item on the master list.

Step four of the risk management process is to break the planning team into subgroups and to give a portion of the master list to each subgroup. Each subgroup can then identify the triggers (warning signs) for its assigned list of project risks.

Step five of the risk management process is for those same subgroups to identify possible preventive actions for the threats and enhancement actions for the opportunities.

Step six of the risk management process is for the subgroups to then create a contingency plan for most but not all project risks – a plan that includes the actions one would take if a trigger or a risk were to occur.

Step seven, the final step in planning the risk management process, is to determine the owner of each ...