In every project management, there is always the chance that something unexpected will happen. An unexpected event is always a risk; its impact can be negative or positive. Risk managers are responsible for enacting the processes that help manage these project risks.
Stages of Risk Management
The established processes for managing risks are broken down into stages. The four stages of risk management are to identify, assess, respond, and monitor & report on the potential risks of a project. Risk management is vital for the success of a project and should be enhanced with every new project.
Identifying potential risks is the first of the four steps in the risk management process. It is accomplished during the planning phase of a project. The purpose of this stage is to explicitly define all possible events that may impact a project in order to prepare adequate responses.
Once risks have been identified, the next step is to assess their impact. By determining their impact, risk managers can prioritize the responses based on the probability and criticality of the risks. Assessing risk impacts also allows a team to be financially prepared for additional costs not anticipated in the project budget.
Next, a response plan is formulated to prevent or mitigate project risks. In this stage, the objectives are to reduce the impact or chance that a negative risk will happen or increase these factors with a positive risk.
Monitor & Report
The last of the four stages of risk management is to monitor and report project risks and response strategies throughout a project. You cannot determine all risks before they happen; that’s why they are considered unexpected. But continued monitoring during a project allows you to add new risks as they come up. Reporting can be done through weekly project management meetings or laid out in an email; the how is not as important as long as reports are made regularly.
As stated, the impact of risks can be either negative or positive. There are various aspects of a project that can be affected, but more common negative risk impacts include:
- Communication Risks
- Cost Risks
- External Hazard Risks
- Market Risks
- Operational Risks
- Performance Risks
- Resource Risks
- Scope Risks or Scope Creep
- Technology Risks
- Time Risks
Adverse risks can cause a project to go over budget, take longer than planned, not perform as expected, require more resources, or need clear objectives. Each risk can be prevented or mitigated to lessen the probability of them happening or the scope of their impacts. Still, the proper response strategies must be in place before their occurrence.
Once you can confirm the probability of a risk happening during the risk management workflow, it becomes an issue. Proper handling of a problem requires risk response strategies to be prepared and put in place ahead of time during the response step in the four stages of risk management.
For harmful risks, the response should avoid, mitigate, transfer, or accept the impact on a project. For positive risks, the response should exploit, enhance, or share the beneficial effects with other team members or projects.
Implementing and maintaining adequate strategies for identifying and responding to project risks are essential for project success. A necessary tool for achieving these objectives is project management software that assists in organizing, monitoring, and reporting on project data, risks, and progress in real-time.
Many software solutions are available on the market, including WorkOtter, where we dedicate our time to providing customers with simple, expert solutions at affordable prices. Our software tools make managing projects easier, including the steps in the risk management process.