Risk Management generally covers identification, assessment and prioritization of risks and the composition of mitigation strategies. Risk management in projects are at the responsibility of project management.
Steps of Risk Management in Project Management
Modern Risk Management usually falls into 4 steps:
Step one: Identification of Risks
To identify risks that might occur in your project is the first major step in risk management in project management. Team sessions might be an appropriate way to visualize possible future scenarios and threats. Encourage your team members to bring in their personal experiences and expertise. Another option would be to contact experts outside the project that possess of a track record with the type of project you are working on. Try to research on business cases, old project plans of similar projects and specialized websites. List down all risks you have identified and assign a „risk owner“ for each risk you have found. That risk owner is the one in your team who will be responsible for that risk and its „behavior.“
Step two: Prioritization and Analyzing of Risks
Treating all risks equally would make risk management in project management quite easy, but it won´t bring you close to success in your struggle. There are some risks that can harm your project more severe than others. Those are the show stoppers you should concentrate on, they are your number one priority. The other risks can be prioritized on a set of criteria that consider the impact of a certain risk and the likelihood of its occurrence.
Be sure to address also „low“ risks, although they don´t have the power to kill the project, they might become issues by delaying project steps and programs. At any rate, understanding the nature of a risk is an essential step for a good response to it. Try to describe the effects the risk brings along and the causes and origins it comes from. The information you gather by analyzing risks will be very helpful in order to find appropriate responses.
Step three: Implementing of Risk Responses
Implementing risk responses in a planned and systemic way enriches your project and upgrades the level of its professionalism. When it comes to deal with threats, there are three approaches to that topic: risk acceptance, risk reduction and risk avoidance.
To avoid a risk means to adjust your project organization in a way that this specific risk cannot occur anymore. Minimization of risks can be done either by influencing its causes or by decreasing or absorbing the negative impact it brings along. Last but not least, to accept a certain risk is always a conscious choice and should be done only in case of some „low“ risks with proven minimal effect on project´s growth.
Please note that costs for risk prevention should never exceed the amount of loss or damage that can be caused by the threat!
Step four: Tracking of Risks
Tracking risks is a day-to-day job in project management. An appropriate option to deal with it is to integrate risk tasks in your daily project management routine. Design them to identify and analyze risks and to generate real-time responses. Since nature and importance of threats are subject to change, risks and their responses should be monitored thoroughly during project execution.
Risk Management for Projects – this should be also considered
It is important, that the entire project staff is completely aware of risks and the opportunities to response. The topic should be well discussed and communicated. But even risks have a negative connotation, they can also offer chances and opportunities. These are the uncertain events that can boost your project and make it more profitable.
And last but not least: be sure to measure the effects of your risk management strategies since this is the key to perfection by continuously improvements.