When you identify, analyze and manage uncertainties in a project, be it opportunities or threats, it is known as risk management. This helps pave way for the successful completion of a project. It is believed that when addressing uncertainties proactively by combining it with a strong project management program the problems/challenges decrease by 60-70 percent.
Principles of Risk Management
The principles of risk management include creating value, being a part of the decision making, being systematic and structured, project specific, transparent and inclusive, periodic reassessing, integral to the organization, addressing uncertainty and assumptions, based on accurate information, account for human factors and be responsive to change. According to an article published in PMtimes, the author suggests ways to build an effective risk management system.
Embeded Risk Management
Ensure that there are visible benefits to illustrate the approach and make risk management a part of the day-to-day operations.
It is most effective when done early through the project. A brainstorming session with the team member to list out several potential risk items is ideal. The various threats that need to be identified are: known risks, human threats, operational issues, procedural implants, financial threats and natural events. Get a perspective of your project from industry experts if possible. Apart from these, identify the opportunities that may impact the project too.
Ownership must be given to individuals to handle one risk each and optimize it to decrease the threat or capitalize if it is an opportunity. This enables an effective and clear communication channel.
Once you identify the risks you need to prioritize the impact each one will have on the project. You can make an estimate of the probability based on the expense it will take to fix it. Focus on the bigger risks first and then the lesser priority risks.
Make a note of the causes and circumstances of the risk and assess the likelihood of project completion on a specific date. When you gain a good understanding of the risk, it provides insights into managing them better.
A response for each risk can be divided into 4 options namely transferring the risk, avoiding the risk, minimizing the risk and accepting the risk. Once this is done a contingency plan can be chalked out based on the intensity and impact of the risks.
This helps keep a track of the risk ownership, analysis of cause and a risk description and provides the project status. It needs to be updated regularly to retain its relevance in the project lifecycle.
The author believes that an effective risk management process helps in crisis prevention and project cost reduction. By implementing it at the beginning of the project, the team can be prepared for any contingencies and improve the results.
Click on the following link to read the original article: https://www.projecttimes.com/articles/seven-crucial-steps-to-effective-project-risk-management.html