When taking on any endeavor, you have to be prepared for the inevitable risk that will arise. No project ever runs perfectly. Snags will arise. You need to be prepared for what you will do when the time comes or, even better, you need to know how to prevent as many hurdles as possible.
A risk is any uncertain event or condition that may take place. All risks have a cause and a consequence. However, not all risks are negative. Some risks may be an opportunity. There are six processes to follow when planning and managing risk.
Risk Management Planning
According to the A Guide to the Project Management Body of Knowledge - 3rd Edition (PMBOK®), “risk management planning is the process of deciding how to approach and plan the risk management activities for a project.” Whether you decide to identify risks before the project begins or in the middle, a Risk Management Plan should be drafted. Among other things, the Risk Management Plan determines how risks will be identified, monitored, controlled, and eliminated. This plan will identify what will be considered a risk and how it will be managed. It also defines the team roles and responsibilities for risk management.
PMBOK® defines Risk Identification as “determining which risks might affect the project and documenting their characteristics.” There are two main types of risks: Organization and External. Organizational risks include inconsistent cost, time, and scope objectives, lack of funding, or resource conflicts with other projects. External risks may involve legal or labor issues. You can use the following information as tools to identify risks:
- Historical information from previous projects
- Documentation reviews of prior project files
- Gathering information by brainstorming, interviewing, or SWOT analysis
- Risk log of all possible risks
- Assumptions analysis to explore the risk’s validity
- Diagramming techniques, such as cause/effect diagrams or a system flow chart
Qualitative Risk Analysis
Qualitative Risk Analysis is “assessing the impact and likelihood of identified risks.” (PMBOK®). This ranks risks in order according to the potential effect they will have on the project. When looking at the qualitative risk analysis, you must consider the risk probability and the risk impact. Risk probability is the chance that the risk will occur. Risk impact is the consequences if the risk occurs. Once the probability and impact of the risk has been determined, establish which risk category it should go in. For high risks, consider ways of reducing the impact or prepare a contingency plan. For medium risks, prepare a contingency plan. For low risks, take no immediate action, but continue to monitor them.