Risk Management

Finding the Silver Lining in Project Risk Management

What is a silver lining? I’ve often asked myself that question whenever the term is referenced in its proverb, “For every cloud there is a silver lining.” The short answer is that it entails seeing a glimmer of good in a largely unfortunate scenario. The silver lining of a project’s uncertain future is project risk management. Marge Tam, PMP elaborates in a post for PM Hut.

Got Risk? No Problem

Risk is natural. It’s not something to be feared. The key thing to remember is that risks are not problems. A problem is something that already happened. It could have worked out, but it didn’t. Now it’s your problem. A risk is something that could be a problem or it could be a solution – the uncertainty is what makes it a risk.

Bad Risk (Impacts)

  • Project Slip
  • Budget overrun
  • Unsatisfied customer

Good Risk (Opportunities)

  • Return on investment
  • Revenue generation
  • Process improvements

The 3-Step Risk Process

Fortunately, there are ways for project managers to transform largely negative risks in to wholly positive outcomes, in a sense transcending the silver lining – bringing the sun out from behind that cloud. This involves the risk process of:

  1. Identification
  2. Assessment
  3. Management / Execution

The project manager is a crucial agent of risk management. In the identification stage of the process, flip charts, Post-It notes, audio recordings, and questionnaires are all possible ways for team members to identify the attributes of risk. Collective input then gets funneled into a centralized spreadsheet for analysis.

Once identified, risks are then prioritized. They are ranked in terms of impact vs. opportunity in the WBS or the project plan:

Both the probability and impact of the risk are being assessed before the risk can be identified as a true risk for immediate attention. The probability is the assessment of the chance of the risk from occurring, and the score of 1 to 10 can be assigned, with 1 being the lowest chance, and 10 being the highest chance for the risk to occurring.

This ranking can be framed quantitatively, or it can be framed descriptively. Multiplying the quantitative and qualitative scores together will yield the overall risk score that is used to prioritize risks:

Ex: (Quant. Risk Score = Probability x Impact) x (Quant. Risk Score = Probability x Impact) = Overall Risk Score

The top five to ten risks get owned for resolution. Each owner has a plan for risk reduction. Any risk can be avoided, transferred, or accepted – a.k.a. contingency plans that get logged in the risk schedule of the project plan document. In your weekly meetings, review the risk schedule for potential triggers, and remember that every risk has a silver lining, a potential opportunity disguised as a threat.

Read the original post at: http://www.pmhut.com/what-is-the-silver-lining-for-projects

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