Every project, regardless of its size or complexity, involves a certain degree of uncertainty. This uncertainty could be caused by several factors, including changing market conditions, unforeseen technical challenges, regulatory shifts, and resource constraints, to name just a few. Uncertainty can disrupt project timelines, cause overshoots of budgetary allocations, and even lead to project failure. To ensure it does not negatively impact on the project, a proactive and strategic approach is essential. This is where risk management comes into play. The 4 stages of risk management serve as a safeguard against the negative consequences of unseen events.
In this article we will explore what a risk is, and how risk management can be deployed to identify, analyse, mitigate, and monitor potential risks before they evolve into tangible issues. By engaging in proficient risk management practices, you can rest assured that you have done everything you can to secure successful project outcomes.
What is a risk?
Before we discuss risk management practices, we must first define what we mean by risk. AXELOS Ltd (2020), in their book titled ‘PRINCE2 Agile’, define risk as “an uncertain event or set of events that, should it occur, will have an effect on the achievement of objectives. A risk is measured by a combination of the probability of a perceived threat or opportunity occurring, and the magnitude of its impact on objectives.” Risks can be external, such as economic fluctuations or regulatory changes, or internal, like resource limitations or skill gaps within the team. It is important to consider both external and internal factors and their potential impact on project delivery.
The 4 stages of risk management
The key risk management principles are four fold: Identify, Analyse, Mitigate and Monitor. We will cover what each of these stages involves in this next section.
Stage 1: Identifying Risks
The first of the four phases of risk management is to identify potential risks that could impact your project. Risks should be identified throughout the project lifecycle and may be raised by any project stakeholder. Once identified, risks should be captured and monitored within a risk register. To identify risks, our Project Managers use the following techniques:
- Risk register review meetings: Our Project Managers set up recurring meetings to review the risk register with the project stakeholders. During these meetings, our Project Managers run through the risks that have been identified, update these, and then brainstorm and capture additional risks with input from the project team.
- Transparent communication: We encourage open and transparent communication between all project stakeholders. All project stakeholders have access to the risk register and can add and update risks at any point during the project lifecycle.
- Historical data: Our Project Managers encourage project stakeholders to analyse data from past projects to identify whether any previous risks could also impact the delivery of this project.
- Expert advice: Our Project Managers share the insights they have gained through running similar projects, along with mitigation strategies to reduce the likelihood or impact of these risks.
Stage 2: Analysing Risks
Once risks are identified, the next step is to assess and analyse their potential impact and probability of occurrence. This analysis helps prioritise risks and develop appropriate mitigation strategies. Here are two key aspects of risk analysis:
- Risk Impact: Evaluate the potential consequences of each risk on project objectives, including schedule, budget, quality, and scope.
- Risk Probability: Estimate the likelihood of each risk occurring based on historical data, expert opinions, and other relevant information.
Stage 3: Mitigating Risks
With a clear understanding of the identified risks and their potential impacts, it is time to develop strategies to mitigate or reduce these risks and threats. At the beginning of a project, risk tolerances are set; if an identified risk falls within the agreed tolerance, the Project Manager, along with the team, can decide on the appropriate response. Mitigation strategies aim to lessen the negative effects of risks or prevent them from occurring altogether. Some common risk mitigation strategies include:
- Risk Avoidance: Avoid or eliminate high-risk activities or components from the project plan.
- Risk Transfer: Shift the responsibility for certain risks to third parties, such as insurance or outsourcing.
- Risk Reduction: Implement measures that reduce the likelihood or impact of risks.
- Contingency Planning: Develop contingency plans for high-impact risks to minimise disruptions and ensure a smooth response if they do occur.
Let us run through an example to demonstrate how these mitigation strategies might work in practice:
Risk: Shortage of skilled personnel needed to deliver a project.
Risk Management Strategy
Restructuring the project plan to focus on tasks that can be completed with the current team's skill set. This might involve postponing certain complex tasks or adjusting the project scope to align with the available expertise.
External agency contracted to handle specific tasks vulnerable to the skills shortage.
Team initiates a series of training workshops and upskilling programs for existing team members to enhance their proficiency in the required skill area.
Team develops a contingency plan that outlines alternative approaches in case of a skills shortage. This could involve identifying potential backup resources, cross-training team members, or implementing a phased approach that allows time for skill acquisition.
Stage 4: Continuous Monitoring
One of the key risk management principles lies in continuous monitoring and control. To ensure that this process takes place, this should be assigned to someone within the project team, normally this would be the Project Manager or Team Manager. This person should take the lead in regularly reviewing the identified risks and their mitigation strategies throughout the project lifecycle with the project team. If new risks emerge or existing risks evolve, then strategies will need to be adjusted to accommodate those changes.
Risk is an inherent part of every project, however, maintaining a proactive attitude to the 4 stage of risk management can safeguard project objectives and outcomes. By diligently identifying, analysing, mitigating, and monitoring risks, you can enhance your project's chances of success, minimise potential setbacks, and deliver results that meet or exceed stakeholders' expectations.
How StableLogic can help
Our three decades of experience running technology-based projects have taught our Project Managers to expect the unexpected. We manage all risks and issues daily, ensuring the right people are involved and informed at the right time. Our risk mitigation strategies ensure accountability; and that we are staying within budget, within scope and in accordance with the statement of work. This keeps your project on track and optimises the delivery for better results.
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