So you might ask, does this mean that we are helpless against unknown problems? Are we doomed to live in a business world where projects and decisions are squashed before they even begin out of fear? No! Thankfully we can use risk planning to identify the potential problems that might arise on project and like a stick in a bicycle wheel bring everything you are doing to an abrupt halt.
Plain and simple, there are no guarantees on any project. A simple activity can have the worst issues. Murphy’s law states that anything that can go wrong, will go wrong, and while this might not always hold true, if it does it will force you to pivot and change the way we work on a project.
Risk Management Process
Now that we understand that risks, while “scary” can be mitigated with some planning and forethought, the first thing we have to accomplish is risk assessment, before we can actually prepare a strategy for mitigation.
Identifying risks is a process that is both creative, and disciplined, and something the whole team should be involved in. On the creative side of things, a series of brainstorming sessions with the team occur, asking everyone to create a list of what could go wrong. Every team member’s input is valuable in this stage as the more ideas you have, the less potential there is for something to get missed or lost in the process.
A few other (more disciplined) processes that are often used are risk checklists and grouping risks by category. These risks are often drawn from experience from past projects. Project managers and teams use these helpful tools to identify potential risks with their current project. If you are breaking down by category, it could include some of the following: technical, cost, schedule, stakeholders, talents and etc. Finally, using a framework work breakdown structure (WBS) a risk breakdown structure (RBS) can be developed, deep diving into subtypes of risks using a table with increasing levels of detail to the right. The result from this process is a clearer understanding of where risks are concentrated, but comes with the cost of being restrictive and less creative in identifying the project’s risks.
So now the brainstorming sessions are over, every team member has been heard and a list of possible risks sits in front of us, from a likely issue to the furthest realm of possibility. So how do we sort though this information to make sure we spend our time in the right places? This is where evaluation becomes the name of the game. Every risk and consequence is not created equal, so it is key to process which events are more likely to occur, and figure out what the overall cost of each risk could be. Once this is done narrow it down to critical risks, something that could seriously harm your project. For instance, if a risk could increase your project costs by 2%, this could be a critical issue moving forward. Spending effort and focus on these risks should be a top priority moving forward.
A thing that needs to be understood is this process does not happen in a vacuum. Utilizing the team is key in figuring out the chances of a risk occurring, and furthermore for calculating the potential cost if it were to occur. Use the So now the table is set for your project, and you know what risks could occur. It’s time to mitigate some risks!
We know the risks, and now its time for the project team create their risk mitigation plan. There are four basic ways to handle a risk, and reduce its impact on your project.
Simply put, the best thing you can do to a risk is avoid it completely. If it never happens, it can’t hurt your project. Imagine you are riding a bike in town, and you come to a fork in the road. Down one is a quiet street, and it will get you to your destination quickly, but down the other is a steep hill leading to a busy intersection. Obviously given the choice, that nice quiet street is the good way to avoid risk. But sometimes roads are closed for construction, and sometimes risks are unavoidable.
So you can’t avoid the risk, at least you can attempt to mitigate it. This involves taking an action that will cause the risk to do as little damage to your project as possible. Going back to our biking dilemma, getting off of the bike and walking down the hill with the bike at your side would be an example of mitigating that risk.
Another effective way of dealing with a risk is to pay someone else to accept the risk for you. Commonly, insurance is used to transfer risk from one person or organization to another. For our biker, knowing that the safe road is closed and calling an Uber would transfer the risk of damage.
We’ve looked at all our options, and we cant avoid, mitigate or transfer the risk to another organization. Unfortunately, sometimes the risk is completely unavoidable, so you just have to take a deep breath and turn your wheels towards that hill. If there’s nothing you can do to mitigate the risk, your only choice is acceptance.
The risks have been assessed and a plan is in place, but to be safe its always a good idea to go one step further. The project team will often create a backup method for accomplishing a goals that may be unreachable due to an associated risk. These plans are called contingency plans, and funds are set aside to address the eventuality that a projects costs will increase. High-risk projects require a larger contingency budget, while low-risk ones may be negligible. These funds are usually set aside during the budgeting process, as a one line item in the project budget. Some project managers use the one line option, while others stray towards individual budgets for high risk items, allocating each line its own contingency budget.
The end product is a buffer against the problems that any project can face. Consider a risk management strategy like putting storm windows on your house; while you may be able to get away with not having them, the possible damage that comes with being unprepared is more than can be afforded in most cases. Risk shouldn’t be a word so filled with fear and worry, with the right plan what seems like a dark uncertain room can be quickly filled with light.