Project Risk Management

Introduction

Risk is inevitable in a business organisation when undertaking projects. However, the project manager needs to ensure that risks are kept to a minimum. Risks can be mainly divided into two types, negative impact risk and positive impact risk. Project Managers would not solely be facing negative impact risks as there are positive impact risks as well. Once the risk has been identified, project managers need to come up with a mitigation strategy or solution to counterattack the risks identified. In the context of project management, risk refers to any factor (or threat) that may adversely affect the successful completion of the project in terms of delivery of its outputs and securing the outcomes. These include adverse effects on resourcing, time, cost and quality. These factors/threats include risks to the project’s business environment that may prevent the project’s outcomes from being fully realised. There are always risks associated with a project. The purpose of risk management is to ensure that the levels of risk and uncertainty are properly managed so that the project is successfully completed. It enables those involved to identify possible risks, the manner in which they can be contained and the likely cost of mitigation strategies.

Project Risk Management Steps

Managers can plan their strategy based on four steps of risk management that prevail in an organisation. The steps to manage risks effectively in an organisation are as follows:

• Risk Identification
• Risk Quantification
• Risk Response
• Risk Monitoring and Control

Risk Identification

Managers face many difficulties when it comes to identifying and naming the risks that occur when undertaking projects. These risks could be resolved through structured or unstructured brainstorming or like strategies. It’s important to understand that risks pertaining to the project can only be handled by the project manager and other stakeholders of the project.

Risks, such as operational or business risks will be handled by the relevant teams. The risks that often impact a project are supplier risk, resource risk and budget risk. Supplier risk would refer to risks that can occur in case the supplier does not meet the timeline to supply the resources required.

Resource risk occurs when human resources allocated to the project are less than the number required and are not skilled enough. The budget risk would refer to risks that can occur if the costs are more than what was budgeted for.

Risk Quantification

Risks can be evaluated based on quantity. Project managers need to analyse the likely chances of a risk occurring and the consequence of the risk to the project. Here is an example of a risk assessment matrix.

Risk Response

When it comes to risk management, it is up to the project manager to choose strategies that will reduce the risks to a minimum level. Project managers can choose between the four risk response strategies, which are outlined below.

• Avoid the risk transfer the risk
• Take corrective measures to reduce the impact of risks
• Acknowledge the risk

Risk Monitoring and Control

Risks can be monitored on a continuous basis to check if any changes need to be made. New risks can be identified through constant monitoring and assessing mechanisms.

Risk Management Process

Some actions to consider in the risk management process:

• Each person involved in the process of planning needs to identify and understand the risks pertaining to the project.
• Once the team members have provided their assessment of any risks, the risks should be consolidated to a single list in order to remove the duplications.
• Assess the probability and impact of the risks involved with the help of a matrix.
• Split the team into subgroups where each group will identify the triggers that lead to project risks.
• The teams will need to come up with a contingency plan whereby they can strategically eliminate the risks involved or identified.
• Plan the risk management process. Each person involved in the project is assigned a risk where he/she looks out for any trigger events and then finds a suitable solution for the risk.

Risk Register

Often project managers will compile a document, which outlines the risks involved and the strategies in place. This document is vital as it provides a great deal of information.

The risk register will often consist of diagrams to aid the reader to identify the types of risks that are dealt with by the organisation and the course of action taken. The risk register should be freely accessible to all the members of the project team.

Project Risk; an Opportunity or a Threat?

As mentioned above, risks can be assessed as either positive or negative.. Negative risks are detrimental and can cause undesirable outcomes for a project..

Negative risks should be mitigated once they have been identified. On the other hand, positive risks can bring about desirable acknowledgements from both the customer and management. All risks need to be addressed by the project manager.

Who is responsible?

Many people involved in a project will have some responsibility for project risk management. This includes the project team members, the Steering Committee, the Project Sponsor, any potential business owners and working groups. It is important that all these people know what they are watching for, and that reporting any potential risks is a significant part of their role. The Project Manager is responsible for monitoring and managing all aspects of the risk management process, such as:

• The development of the Risk Management Plan and Risk Register
• The continuous monitoring of the project to identify any new or changing risks
• Implementation of the planned mitigation strategies
• Continual monitoring of the effectiveness of the Risk Management Plan
• Regular reports on the status of risks to the Project Sponsor and Steering Committee

In large projects, the Project Manager may choose to assign risk management activities to a separate Risk Manager, but they should still retain overall responsibility. It should be noted that large projects are a risk in themselves, and the need for the Project Manager to reassign this integral aspect of project management may be an indication that the project should be re-scoped, or divided into several sub-projects overseen by a project director

Conclusion

An organisation will not be able to fully eliminate or eradicate risks. Every project engagement will have its own set of risks to be dealt with. A certain degree of risk will be involved when undertaking any project.

The risk management process should not be compromised at any point. If it is ignored it can lead to detrimental effects. The entire management team of the organisation should be aware of the project risk management methodologies and techniques.

Enhanced education and frequent risk assessments are the best way to minimise the damage from risks.

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