In the world today, risk management is one of the most relevant aspects of project management. Thanks to technological advancement, the art of risk management has experienced a boost as we are now able to evaluate, manage, and mitigate risks.
Today, risk management is greatly sought after and has been included as part of the field of project management. In this article, we would be looking at what risk management is about and how to effectively mitigate risks in project management.
For those looking forward to studying project management or trying to perfect their skill in risk management, this article will provide enlightening on this field of human endeavor that is getting so much appraisal today.
Before I go into how to effectively mitigate risks in project management, let’s see what risk management is about.
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What is Risk Management?
In project management, the process of identifying, analyzing, and minimizing potentials threats and problems that could negatively impact the progress and completion of a project is called risk management. The goal of risk management in project management is to address any issue that may pose a hindrance to the success of a project.
Without the activities of a risk management team that would be able to identify, rectify, or avoid potentials problems, your project may take more time, become more expensive, or even forced to a halt. Quite important is the role risk managers have to play in the success of any given project.
With that, let’s look at how to effectively mitigate risks in project management.
How to Effectively Manage and Mitigate Risks in Project Management
I would be showing you how to be better prepared in handling risks when on a project. With a risk management plan, you would be able to deal with any risks lurking around your project execution helping you save money, time, and other resources.
The steps I will be revealing in a moment will help you effectively mitigate risks when on a project.
1. Give Room for Risk Management on your Project
You would be able to prevent and combat risk on your project when you have made proper provisions for risk management. Giving room for risk management involves setting up a risk management team by introducing risk management as part of the project management job description.
Today, companies, institutions, and organizations ensure their staff are trained in the art of risk management so they can be able to detect, avoid, and tackle risks when they emerge. It is important to note that specific skillset and expertise are important in managing risks effectively.
Just setting up a risk management team is a step in the right direction but that is not all there is to the practice. Once and again, brainstorming sessions should be held with the aim of discovering risks and identifying possible risk situations. In such sessions, risk identification methods should be explored so that potential risks can be prepared for before they take place.
For instance, if you own a SaaS startup and your risk management team identifies data breaches and cyber-attacks as possible risks to your business, then possible solutions would be to purchase cyber liability insurance and probably get your system secure with powerful firewalls.
Findings from a survey conducted by the Project Management Institute (PMI) showed that 83 percent of organizations doing well in terms of project management practice the art of risk management. It also showed that about 49 percent of organizations performing poorly do not engage risk management in project management.
Furthermore, the organizations performing well meet their goals twice as fast as the poorly performing organization with the latter spending 13 times more money than the former. To achieve the goals of your project management team, spend less money, time, and assets doing so, give room for risk management.
2. Encourage Communication and Interaction
Imagine a member of your risk management team tells other members in a team meeting about a risk they identified over the weekend and then plans are made to tackle it and before the month runs out the risk actually takes place. Fortunately, your team has already made plans for it and effectively combatted it. You see how communication is important among your risk management team.
There is so much your team members can achieve when they communicate and interact with each other on a consistent basis. As every team member works on their individual tasks, let there be room for interaction amongst themselves so each member shares what they find on their own.
Every team member should communicate risks explaining the impact on the project, how it will happen, how to mitigate it before it does, and how to combat it when it takes place. Members of your risk management team should understand teamwork and the team leader should be able to carry everyone along.
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3. Give Priority to Risks
Some risks have a higher impact than others and as such risks can be divided into two (2) categories namely high-degree risks and low-degree risks. So what are they exactly?
High-degree risks are risks that would have a severe impact on the progress and outcome of the project while low-degree risks may equally affect the outcome of your project but could be managed.
Taking the example of the SaaS startup, a data breach is a high-degree risk with hardware damages considered to be low-degree risks. While it is easy to deal with hardware issues without stress, a data breach would require a more holistic approach.
In lieu of this, risks must be given priority. Your team should spend time weighing risks, discussing their impact, and attaching priority levels to them. To properly prioritize risks, your team should ask questions such as:
- What will the risk impact? The project, the product, or both?
- How important is the project to the company?
- Will the risk affect your company’s relationship with clients? How important is the relationship with such client(s)?
- Who needs to be aware of the risks and what’s their stance?
Proffering answers to the questions above will help your team properly prioritize risks.
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4. Conduct Risk Analysis
In the course of prioritizing risks, an important aspect is risk analysis. Risk analysis is important to make for understanding the nature and potential impact of a risk and it takes place at various levels.
Conducting a risk analysis is a crucial part of effectively mitigating risks. This is because the impact of some risks may seem less severe but when they occur impact levels can be overwhelming. This is another reason why your risk management team must be made up of experts and not just rookies.
To conduct risk analysis, these are some of the steps you should follow:
- Give the risk probability a score either on a scale of 1 to 10 or low, medium, and high
- Give the impact a score should the risk occur as was done to the risk probability
- Attach a priority level to the risk as in the steps above
- Give an estimate of when the risk will occur and how it will impact the project
This is basically what risk analysis is about.
5. Initiate Risks Responses
Doing all I have listed from point one to four involves identifying risks, prioritizing, and analyzing risks. This point caps it all – initiating risks responses. Experts divide this part into three core parts namely acceptance, avoidance, and minimization.
All three have areas and scenarios where they come into play and your risk management team should understand where and when they come in.
Certain risks may be inevitable and must be accepted others can be avoided while in some cases your best bet is to try and minimize the impact of the risk. Bringing our SaaS startup example once again, it is unrealistic to think that your company would not be a victim of cyber-attacks.
So while you try to secure your software and databases, you should try and purchase cyber insurance to help minimize the impact of such attacks when they eventually take place. Your team should not just identify, prioritize, and manage risks but also take strategic steps either in accepting, avoiding, or minimizing risks.
It really is possible to effectively manage risks in project management and the points I have shared will guide you in doing so. You can equally adopt other risk management approaches and tools available online to further strengthen your risk management practice.
An important point to note is that tracking risks must be done on a regular basis. This is why a dedicated team must be put in place whose job it will be to handle risk management on your project. By tracking risks regularly, your team will be able to discover more risks and their impact on your project.
As much as they can, they should provide reports containing identified risks with complete analysis covering causes, effects, and preventive measures.
Cheers to success in your project management.