Risk Management Process:- By definition, a risk is a potential hazard, more or less predictable, inherent in a situation or an activity. In project management, zero risk does not exist. It is likely that your project will not be carried out as planned. The idea is therefore to anticipate and minimize the risks that could arise in order to reduce their impact on the smooth running of the project.
As soon as the project is launched, you must put in place a risk management: look for the weak points of your project, think about the actions to prevent the risks and consider the solutions to make if they occur. Thus prepared, you will avoid being destabilized when unforeseen events occur.
It is impossible to predict all risks, which is what gives an adventurous side to the project management. However, a rigorous risk analysis is a good way to ensure the success of your project.
5 Steps of Risk Management Process
The risk management process of a project consists of five stages.
- Identify Risks
Risks are essential information that a project manager needs to know about his or her project. As soon as the project begins, you must make the most exhaustive list of all the events that generate the risk. To do this, gather your team and brainstorm to identify all the possible dangers.
There are different types of risk:
- Financial: cost over estimate, lack of budget, etc.
- Human: lack of skills, absenteeism, resignation during the project, conflicts within the team, etc.
- Temporal delays: subcontractors or suppliers delays, incorrect estimation of delays, etc.
- Techniques: inadequate software, failures, obsolete hardware, etc.
- Legal requirements: regulations and laws, bankruptcy of a supplier, etc.
- Environmental: negative impacts of the project on the environment, or environment having an impact on the project (flood, drought, storm.
- Organizational changes: changes in company policy, economic changes, etc.
Consulting the archives of similar projects, whether successful or failed, can be a valuable source of information on the risks usually encountered. You can also seek expert advice.
- Evaluate and Prioritize Risks
Once your list of potential threats has been established, analyze each one to estimate their impacts on the project’s timeframes, costs and technical specifications. This will allow you to separate the unfounded risks from the actual risks and likely to affect the progress of the project.
Next, you should assess the likelihood of occurrence of each of the identified risks and their severity in terms of impacts, damage and consequences on project objectives. This evaluation results in a risk hierarchy.
The goal is to focus on the most important and most likely risks, to act effectively to prevent them from occurring, and to determine which actions to take as a priority to control them.
- Dealing with Risks
Risk treatment can be done in three ways:
- Eliminate the risk: You can repel the threat by implementing actions to remove the causes of the risk, such as increasing your resources or recruiting competent staff. Cost will then be a determining factor in decision-making.
- Limit the effects of risk: you cannot prevent the risk from happening, but you can limit its negative impact on the project and make it more bearable.
- Revising the project: to avoid risk, the only option is to reorient your project, simplify it or find less risky alternatives.
Define responses for each risk, on a case-by-case basis. Identify the critical points, that is, periods when you need to be more vigilant because the risks are greatest. You can also accept the risk and monitor it carefully to try to control its effects.
- Monitoring and Controlling Risks
Risk monitoring should be carried out throughout the project. As your project progresses, the potential risks change. Some may disappear, others may appear, those considered weak may become real threats and vice versa.
Regularly review the risks by updating your list of potential threats, reassessing them and ensuring that prevention actions are always appropriate. It is important to assign one or more people to this mission in order to be sure that it will be rigorously performed.
- Capitalize and Document risks
Your project is now complete. Congratulations, you succeed despite the risks. It is now essential to capitalize on the know-how and experience acquired during the risk management of your project.
There are several reasons for this:
- Enhance knowledge of potential risks on similar projects;
- Increase response reactivity;
- Facilitate decision-making;
- Improve the effectiveness of actions to eliminate risk.
As you have relied on the experiences of other project leaders, do the same by sharing your knowledge of risk management process. It is up to you to ensure the traceability of the risks encountered, the actions taken and the results obtained on your project.
As you know, risk is an integral part of project management. It is therefore essential to set up a risk management plan, from the first stages of the project’s launch. This makes it possible to identify, prevent and limit these risks by anticipating their treatment through the implementation of preventive and corrective actions. This is an essential phase that will allow you to minimize the waste of time and money, and will prepare you to effectively manage the risk when it occurs.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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