Risk Management for Results
By: Matthew Sheaff
We’ve all been there before. You are halfway through a project and a team meeting was just called because an unforeseen risk has just popped up and management and the project team are now launching into disaster recovery mode. However, this is not where project teams should be spending their times and proper risk management techniques can successfully aid us in planning for, mitigating and controlling project risks. The PMBOK Guide Third Edition lays out six processes involved in risk management; however, these complex processes can be broken down into three easy steps for effective risk management.
Step 1: Identify Your Risks
Brainstorm with your team all areas of potential risk that may arise with your current project. These risks could have impacts that range from low to high and probabilities of occurring that are less likely to almost certain. During this brainstorming session it is really important to lay out all risks that the team members describe. At this point in the process all suggestions are valid and the evaluation of those suggestions will come in the next step.
Step 2: Creating a Risk Matrix to Quantify Your Risks
Now that you have listed all the potential risks that could impact your project, it is the team’s responsibility to quantify them to determine which would have the most impact. Often times, the team does not have sufficient time or resources to mitigate all risks so they set a target and plan and mitigate for all critical ones. This can be done using a Risk Assessment Matrix (RAM). The Ram calculates the impact that the risk would have if it occurs (schedule, scope or resources) and the likelihood of the risk happening. Figure 1.1 is an illustration of a sample Risk Assessment Matrix.
| Risk |
Impact |
Likelihood |
Overall Risk Assessment |
| Lose key resource |
5 |
4 |
20 |
| Unreliable vendor |
4 |
2 |
8 |
| etc. |
|
|
|
When calculating the impact and likelihood on the RAM do not complicate the process. Use a simple scale of 1-5 (one being the lowest, five the highest). The matrix can also be a forum for team discussion on each risk. Questions should and often arise as to how much a certain risk would impact a project. Finally, the last step of the RAM is to calculate the overall risk assessment for each risk. That’s found by multiplying the impact by the likelihood. Once those numbers are laid out, the team then determines the cut off number for what constitutes a high risk.
Step 3: Develop Risk Management Plans
Once you have all the risks calculated, the team should develop a risk management plan for each risk they have identified as high. There are four steps to creating a risk management plan.
1. Identify all the causes of the risk.
2. Identify potential impacts if the risk did occur
3. Develop a risk trigger – the trigger notifies you that the risk did occur
4. Assign owners to all risk management plans
When it comes to risk management, Dr. Harold Kerzner describes the practice best: “Effective risk management Matthew Sheaff currently serves as the Director for the Center of Project Management at The American Strategic Management Institute. For questions and or comments, he can be reached directly at Sheaff@Managementweb.org.
|
| Effective Project Management is key to mitigating organizational risk. ASMI offers a comprehensive schedule of project management training programs that will keep your projects on time, within cost and within quality specifications. Additionally, our training courses are designed as certificate programs and as preparation for the PMP exam to aid in your career advancement. |
|
|
|
Please see our Events section for more listings
|
|
|
