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Building risk management into the project plan
Transcript of Building risk management into the project plan
into the project plan
Just like this wall, which needs to be continuously worked on until it is completed, your project management plan remains
a work in progress that gets built on and developed
Risk is inevitable when a
undertakes a project.
But risk invariably
impacts various aspects of a project, including the:
This is why efficient practice
requires that risk be managed
alongside the management of
other project considerations.
Throughout the project life cycle, as risk information changes (e.g. if new risks arise or if existing risks become irrelevant), the project management plan needs to be updated in terms of the impact that the changes in risk status will have on the project's schedule, quality, scope and cost objectives.
Did you know?
Some project owners and organisations see planning for risk management as a "nice to have", rather than as an essential component. They often feel that wasting money to prepare for situations that might never happen is not good practice. Smaller companies may find it costly and burdensome to analyse risks in detail for each of the small projects they run.
"There are so many risks,
I don't think we can afford
to prepare for them all.
Besides, I bet many of them
What's interesting is that some
project managers take the time at the
start of a project to identify, analyse and
plan a response to potential risks...
Yet, once their projects
get underway, they
still suffer the consequences
of poor risk management.
Why is this?
Not all risks are known at the start of a project. Project stakeholders may produce a risk
management plan and a risk register during
project planning but then they might not monitor
risks during project execution. Risks need to be
monitored continuously and new risks need to be
assessed and added to the risk register.
So, what is the right risk management strategy?
Plan risk management
by deciding how risks
will be addressed,
taking into account
risk reporting and
and the organisation's
2. Use the risk management plan to identify all possible risks by gathering input from the project team and key project stakeholders, as well as other
experts who may have valuable insights.
Leverage interviews and brainstorming sessions to identify and describe risks unambiguously.
Use and modify risk templates from previous projects where possible.
A SWOT analysis is a useful tool to identify a project's internal and external risks
This process produces a
Once you have a risk register, use it to perform a
risk analysis. This process involves carefully examining each risk in terms of its probability and impact on the project. In other words, assessing the likelihood of a risk event occurring as a % probability and a % impact.
Probability is the likelihood
Impact is the repercussions it is likely to have on the project objectives.
These percentages are in the eye of the beholder, i.e. the project manager determines these likelihoods subjectively.
Next, you need to plan risk responses. This involves planning the appropriate response to a risk event should it occur.
There are generally four ways in which to respond to a risk:
You can create plans to eliminate the probability of a risk event completely. For example, if you're organising a music festival and you anticipate that the noise might likely disturb the peace and upset community members, you can plan to move the event to a remote location to avoid that risk completely.
This involves plans to reduce the probability or impact (or both) of the risk event. For example, if you're working on a project to host an outdoor sporting
competition, you could
plan to hold the competition
during summer to mitigate
the risk of rain.
You can develop a plan to transfer the negative impact of the risk event to someone else. For example, if there's
risk of your project
stolen or damaged,
you can take out
You may decide to accept the risk and deal with it when it happens. An active acceptance strategy will require that contingency risk reserves be allocated appropriately.For example,if you're working on a project you may need to accept the fact that certain team members may fall ill and be unable to work on the project for a couple of weeks.
By accepting this risk, you may need to delay the project schedule, reallocate work or recruit alternate staff.
Part of the risk response planning process is to assign a risk response owner and a contingency plan. The risk response owner is the person who will be responsible for taking action if the risk event
should occur. A contingency plan outlines a response strategy to possible risks and would be implemented if the risk materialises.
Once you've identified, analysed and planed
your responses to risks, you need to update your
project management plan taking into account the
impact that these risks will have on the project
schedule, budget, scope, user requirements, etc.
Risk information is likely to change at any given point during your project. When this happens,it's important to build and work on your project management plan so that the plan reflects any changes made to the project's scope, schedule, cost or quality as a result of the change in risk.
In other words: