Risk Management is about taking informed risk and understanding your organisation’s risk appetite. Risk is inherent in Project Management but without risk assessment and risk mitigation, then risks can be inevitable and why planning (for risks) as a part of a Project Management strategy is critical.
A successful project is delivered when you plan and manage the components effectively. However, even the most well-developed projects experience some risks. But with proactive planning, assessment, mitigation, and then implementing a Risk Management Plan, this will assist your efforts to stay within your project scope, and ultimately, deliver a successful project.
What are the steps in a Risk Management Plan?
When creating a Risk Management Plan, it is crucial to follow a few steps and build a comprehensive plan to addressing known risks, emerging risks, and as well as identifying new risks.
Set Objectives
- The Project Team members need to review business and / or project objectives.
- Your risk management process must align with current and future organisation goals.
Risk Identification
- Review digital assets (e.g., IT systems, networks, software, data, devices, vendors).
- Catalogue digital assets so that key stakeholders can brainstorm ideas and identify corresponding risks.
- Risks can either be a positive risk or negative risk with financial, operational, or business reputational consequences.
- Each identified risk is recorded in a Risk Register.
Risk Assessment
- After risk identification, the Risk Management Team assesses the Known Risks, and the Project Team will review to analyse potential impacts.
Risk Analysis
- For each risk identified and assessed, the Project Team must look at the likelihood of the risk and then, also estimate its potential impact.
- This activity will help the Project Team prioritise risk mitigation strategies and which risk requires priority attention.
- A Risk Assessment Matrix is often used to visualise the potential impacts.
Risk Treatment
- After evaluating the Risk Assessment Matrix and assigning Risk Priority Number (RPN) ratings, the Project Team will determine if it will – accept, transfer, mitigate, or avoid a risk – and prioritise their prevention and mitigation plans.
Risk Mitigation
- The Project Team will design the risk mitigation strategies for the risks it decides to transfer, mitigate, or avoid.
- This includes mitigation actions, dependencies, risk response planning, and contingency plans.
- Risk monitoring activities will be designed in this phase, so the Project Team can determine if prevention and mitigation actions are working.
Risk Management Plan
- The Risk Management Plan is the final document containing all the identified Risk Management factors, Risk Register, analysis, tolerance, and mitigation actions.
- Consistent processes and tools ensure a successful project, and the Project Team uses a comprehensive Risk Management Plan ‘template’ for this exact purpose.
- This Risk Management Plan ‘template’ will include an overview of the planning phase, milestones, and deliverables.
What is a Risk Management Plan?
A Risk Management Plan documents potential risks to an organisation and the steps that your Project Team implements, including identification, evaluation, and risk mitigation. It also includes risk control monitoring, cost-benefit analysis, and financial impacts for potential project risks that have not occurred yet.
- A Project Risk is anything that could impact a project’s success by either delaying the project timeline, budget over-run, or leading to reduced project performance.
- A Project Issue is anything that already has impacted a project’s success but solving issues is a reactive approach, rather than a proactive approach.
With an effective Risk Management Plan, the aim is to minimise any negative impacts and any potential risks can be addressed (and mitigated) during the project lifecycle. This ensures that your project roadmap stays on track, on target for project deadlines, and on budget. The consensus is about knowing how to identify various potential risks and then perform the risk analysis process.
The Risk Management Plan is developed by the Project Manager, with input from key stakeholders (and advice from expert’s) to address risks that are high-level and strategic for an organisation. But in a Project Management environment, a Project Manager will work with the Project Team members and to develop a plan that focuses on project risks.
Project Risk Management: Best Practices
What is ‘best practice’ with building a Risk Management Plan? Well, you need to ensure to incorporate your risk strategy into early stage planning processes and comprising five (5) key areas:
1. Create a strong risk-aware culture
The foundation of an effective Risk Management program is the development of a strong risk-aware culture. Risk culture is defined as the shared values, beliefs, commitment, and attributes about risk throughout the organisation. Your Executive Management are responsible for creating company culture via a ‘top-to-bottom’ approach, to drive collaboration through cross-functional teamwork, and involving the entire organisation.
2. Manage your key stakeholder’s risk-awareness
To manage your risks effectively, you need to engage key stakeholders throughout the project lifecycle, starting with the initial planning phase. Your key stakeholders come from contrasting functions (inside and outside) of your organisation – employees, customers, vendors, etc. This diverse member group provides a comprehensive list and representation of all facets of your business, but each has their own associated risks.
3. Define your Risk Management Policy
With implementing a comprehensive Risk Management Policy, your strategy is crucial for this documented policy to list well-defined roles, responsibilities, and risk templates. This policy will provide broad assistance in identifying all potential risks, the consistent evaluation of the impact of those risks, and how to mitigate risks.
4. Engage your Communication Plan
Communication is an valuable tool for disseminating information and understanding organisational-wide awareness of risks and mitigation strategies. This understanding and information about a Risk Management decision should allow stakeholders to make an informed conclusion about how the decision will impact their interests and values.
5. Evaluate, persistence, and continuous improvement
Risk Management is a continuous, evolving, and constant process. Critical to your organisation is the process of determining what the risks are to your organisation and creating steps to mitigate those risks. Yet, the importance of clear transparency with risk monitoring processes provides assurance to the Project Team and that all risk mitigation strategies are working (and effective).
Summary
While a Vision Statement is inspirational (but often aspirational) and articulates the organisation’s shared vision, this document highlights your first step towards defining your Risk Management goals and objectives – consistent, actionable, and supportive of the organisation’s business strategy. Therefore, your organisation’s business culture provides an important context for Risk Management.
Successful projects are delivered because of a great plan and Risk Management is crucial to the early-stage planning process. The key to writing a ‘good’ plan is with providing the necessary information so your Project Team (and broader teams) knows the goals, objectives, and the risk framework for the Project Management Office (PMO).
The goal of Project Risk Management is to provide a repeatable process that reduces risk on a project or program. So, the best investment in any project is the time (very important!) that it takes to define your Risk Management Plan. It all starts with a solid foundation and planning to help prepare your Project Team for unexpected events, work smarter, and positions your team for success.
Need some guidance on your next steps? Let’s start a conversation…
