The Project Management Body of Knowledge (PMBOK) outlines project risk management as one of the ten knowledge areas in which a successful project manager must be competent. So, we thought it would be handy to address why project managers need to give risk management such consideration and how you can minimize risk to maximize the outcomes of your projects.
All projects involve some level of risk, as they are based on assumptions, constrained by budget and timelines and performed by people who are subject to external influences. So, project risk management is preventative: it’s the process of identifying and mitigating risks before they turn into tangible problems. Project risk management is therefore best performed during the planning stage of your projects.
The process of project risk management involves five key steps:
You and your team must collectively look for and recognize any risks that may affect the project or its outcomes. Many project managers will use the PRINCE2 Risk Register to record the risk management process, which starts with listing all identified risks.
Once you have identified the risks, your next step is to determine the likelihood and potential consequences should any of the risks become realities. Acknowledge how specific areas of your project would be affected, such as goals, objectives, resources and budget.
Evaluating the level of a risk involves considering the likelihood and potential consequence of all the risks you have identified. This allows you to determine the significance of each risk and whether to accept it or to act to prevent it. It’s a good idea to order these risks by their levels (perhaps a numerical ranking or color coding).
For example, one of your risks might be to do with missing information from your HR department. Without this HR information, the project could run into trouble. This is an unacceptable risk so would be placed high in the order and action would be taken to resolve the issue (i.e. a meeting with the HR department).
The next stage is to take the ‘highest ranked’ risks and plan how you can reduce them to an acceptable standard. This is done through risk mitigation strategies, preventative plans and contingency plans:
- Mitigation: reducing the expected cost of a risk by reducing the probability of it occurring.
- Prevention: eliminating the risk by removing the cause.
- Contingency: accepting the consequence of the risk and preparing a solution to the problem to be performed if the risk should become a real issue.
5. Monitor and Review
The final step of the process, this is where you continue to monitor, track and review your risks in your Risk Register. If the treatment stage was successful, then you should not need to take any further action unless external factors come into play further down the project timeline.
To be efficient in every step of the risk management process, project managers need visibility above all else. Without visibility over your projects, those risks may have turned into real problems by the time you identify them. Project managers also need to be prepared for the variables: workers can leave, timeframes and budgets can change. These are constant risks that can become problems at any time, leaving you with little time to react.
To perform project risk management to the best of their ability, project managers should look towards the capabilities of sophisticated resource management software.
While a keen eye for detail is essential in risk management, getting overwhelmed by the details is its own risk. You need to make sure the effort expended on risk management doesn’t outweigh the size of the project or potential impact of the risks you’ve uncovered.
Tempus Resource is a real-time resource management solution that allows organizations of any size to make data-driven decisions, no matter the size or scale of the project. Tempus does this through intuitive ‘What-If’ simulation planning. What-If analysis highlights where there is an over or under-allocation of resources to deal with issues as soon as they arrive.
What-If analysis lets you ask questions of your projects. You can test your ideas, discover alternative allocations of resources and visualize their effects in real time. Discover the impact on cost, time and workers before you actually commit to changes, so you can minimize project risk.