Risk and uncertainty are inherent parts of all project work, making project risk management an important topic for teams to address. Which is why so many projects—especially large technology projects—run into trouble. When studies tell us that easily half of all IT projects run over budget and past deadline, we see how easily risk turns into real trouble for projects and their organizations.
But there are ways you can mitigate and manage risk. When teams have a good project risk management process in place, then you can identify and deal with all the project’s risks in an appropriate and thorough manner. When you’re good at managing risk, it means that fewer issues crop up and that you’re prepared for all eventualities. (And, people start asking for you to run their projects!)
Here are nine project risk management steps that will help you keep everything on track:
1. Create a project risk register
Create a risk register for your project in a spreadsheet. Include fields for date of the risk being logged, risk description, likelihood, impact, owner, risk response, action, and status. A means of accurately tracking information is a crucial first step to a successful project risk management framework.
2. Identify project risks
Brainstorm all current risks on your project with the project’s key team members and stakeholders. Go through all the factors that are essential to completing the project and ask people about their concerns or any potential problems. Identify risks that relate to project requirements, technology, materials, budget, people, quality, suppliers, legislation, and any other types of project risk you can think of.
3. Identify opportunities
When you identify risks, also factor in positive risks and opportunities. For example, include all events that in some ways could affect your project in a positive manner. What would the impact be, for instance, if too many people turned up to the concert? What could you do to exploit this opportunity and plan for it? Just as you anticipate and plan for problems, prepare for unlikely successes.
4. Determine likelihood and impact
Establish how likely the project risk is to occur (on a scale from 1-5) and determine the impact of each risk according to time, cost, quality, and even benefits if it were to occur (again on a scale from 1-5). For example, a likelihood of five could mean that the risk is almost certain to occur, and an impact of four could mean that the project risk would cause serious delays or significant rework if it were to happen.
5. Determine the response
Focus your attention on those risks that have the highest potential impact and likelihood of happening (i.e., an estimate of three or more on the scale mentioned in No. 4). Identify what you can do to lower the likelihood and impact of each project risk. To lower the impact, get to the root cause by asking why, why, why?
Once you’ve determined what you’ll do to address each risk, estimate how much it will cost you to do so. For example, using the concert example—how much will it cost to look after the performer’s health before the show, and how much will it cost to prepare for a backup? Provide a range of estimates (best case/worst case) and add the aggregated cost of these risk responses to your overall project estimate as a contingency.
7. Assign owners
Assign an owner to each project risk. The owner should be the person who is most suited to deal with a particular risk and to monitor it. Assign risk owners with involvement from your team and stakeholders to get the best possible buy-in. Collaborate on the best possible actions that need to be taken, and by when.
8. Regularly review project risks
Another valuable part of any risk management process in project management is setting aside time at least once a week to identify new risks and to monitor the progress of all logged items. Project risk management is not an exercise that only happens at the beginning of the project, but something that must be attended to in all of the project’s life cycles.
9. Report on project risks
Make sure that all risks with an impact and likelihood of four-and-higher (on the 1-5 scale; see No. 4) are listed on your status report. Encourage a discussion of the top-10 risks at steering committee meetings so that executives get a chance to provide input and direction.
Obviously, the importance of risk analysis in project management cannot be overstated. When you have a proven process to lean on, it will undoubtedly lead to projects running more smoothly and successfully. And who doesn’t want that? Conduct a risk assessment for your project now and see how LiquidPlanner can help.
Article Contributor: Susanne Madsen is a Project Management Leadership Coach, and author of The Project Management Coaching Workbook (2012) and The Power of Project Leadership (2015). She is a PRINCE2 and MSP Practitioner and a qualified Corporate and Executive Coach. Susanne is a member of the Association of Project Management (APM) and has over 17 years’ experience in leading large change programs for the financial sector. You can also follow her on Twitter: @SusanneMadsen.