Let’s face it, the moment you kick off a project, risks are also born along with it. And the only way to deal with risks is to manage them.
Risks are inevitable in any project. Risk management focuses on understanding, identifying, assessing, and terminating potential threats to your business or project. The more a project manager can identify and respond to risks, the better the project outcome.
Let’s look at a few tools and techniques you can implement to successfully manage project risks.
Risk Management Defined
Risk management is the process of identifying, analyzing, assessing, and responding to potential factors that could impact the success of a project or business.
The primary purpose of risk management is to control risks and reduce their potential impact on your business goals. It aims to develop responsive strategies for anticipated risks, giving you ample time to fix the issue without severely impacting the effectiveness of the final product.
Why Risk Management Matters in Project Management
You get it. Risk management matters. But let’s dive a bit deeper and take a look at the many benefits effective risk management can offer for project management.
- Less unexpected events: Risk management and assessment enable project managers to prepare for unforeseen circumstances that can slow down a project’s progress.
- Reduced costs: Risks can cause delays and increase project costs. With the right risk management tools and techniques, you can detect risks, work to prevent them from reoccurring, and lessen the impact if they do—saving your project from having to spend more money than necessary.
- Increased project success: Risk management entails developing strategies and action plans to handle risks and stay prepared for the unexpected. Proper preparation sets the stage for project success.
- Enhanced decision-making: Reliable risk management tools and techniques help project managers make informed decisions on risks to avoid or pursue.
Risk Management Tools and Techniques
The risk management process is made simpler and more streamlined with the help of various tools and techniques.
1. Risk reassessment
Risk reassessment is an approach used to identify new risks, evaluate current risks, examine the risk management processes, and close risks.
2. Risk audit
Project managers use a risk audit to examine a risk response’s effectiveness and determine whether changes are required. The method also helps identify, evaluate, respond to, and control risks.
3. Risk register
A register identifies and describes risks. It helps explain the potential impact on the project and the best way to respond to risk if it occurs. The risk register also guides the project manager on which risks to prioritize and who to assign the responsibility of resolving them.
4. A risk assessment template
Common in IT projects, a risk assessment template can actually be put to use in any type of project. The template provides a numbered list of all possible risks and the impact they can have on your project or organization. This makes risk tracking and project execution easier.
5. Variance and trend analysis
A variance and trend analysis is a tool used to look for differences between the schedule/cost baselines and actual results. If the variances are high, the chances of uncertainty and risk will be high. Identifying variances enables project managers to respond to risks quickly before they get out of hand.
6. Risk data quality assessment
A risk data quality assessment tool offers insight into how relevant a risk is to your project to determine whether to ignore or act on it. The assessment process gives you a better understanding of the risks’ accuracy, reliability, quality, and integrity.
7. SWOT analysis
A SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis effectively identifies potential risks and plans for them. The project’s strengths and opportunities will help identify risks with positive impact. Weaknesses and threats in your project are likely to raise negative risks. You can use your SWOT analysis to build proactive plans and solutions to overcome any challenges identified.
8. Root cause analysis
The root cause analysis is a systematic approach used to identify risks within a project. It’s often used after a problem has already come up and hence helps determine what caused it. The technique seeks to discover what happened, how it happened, and why. With these insights, a project manager can develop a plan of action to prevent the risk from happening again.
9. Probability and impact matrix
In the probability and impact matrix approach, project managers combine individual risks’ probability and impact scores and then rank them in terms of ferocity. The ranking enables teams to know whether to respond to threats or not.
Brainstorming is a key aspect of most project planning phases. Participants list all the risks that could impact the project’s completion and success in a brainstorming session. To come up with this list, participants:
- Review the project documentation.
- Examine historical data and information about risks from similar projects.
- Read over articles related to the risks involved.
- Understand all organizational process assets.
Alternatively, the project manager could also use the Delphi technique and send requests to experts, who reply anonymously.
What Are the Latest Risk Mitigation Strategies?
There are five risk mitigation strategies that most businesses use to be better prepared to assess, monitor, and manage project management risks.
1. Risk acceptance
The risk acceptance strategy involves accepting that the risk exists, and there’s nothing you can do that will mitigate or change it. This is a viable strategy when the risk is small or unlikely to happen. In some cases, you may find that the cost of mitigating or avoiding risk will be higher than merely accepting it.
2. Risk avoidance
Risk avoidance involves not performing the activity that causes the risk. Risk management tools and techniques enable the organization to foresee and avoid high-risk situations.
3. Risk mitigation
Risk mitigation is the process of controlling risk. When you’ve identified risks and concluded that they have a high potential to affect the project or business, you can allocate resources to manage those risks.
4. Risk reduction
Risk reduction is usually the most preferred risk management strategy because it focuses on reducing risk. With this strategy, the project manager takes countermeasures to decrease the impact of risks.
5. Risk transfer
Risk transfer involves shifting the burden of the risk consequence to another third party or entity. A common way of transferring risk to another organization is by purchasing insurance. Another way of moving risk away from your organization to another party is through contract terms with suppliers, vendors, contractors, etc.
Using Mission Control as a Risk Management Tool
It’s important to not just understand the various risk management techniques we discussed above but actually implement them! A tool like Mission Control makes that easier.
Our project management tool has a risk assessment and tracking tool that keeps all project data in one central hub and accessible to the whole project team. The risk log feature lets you track all the risks that can negatively impact your project. It also forms an excellent foundation for creating a risk management plan to guide you on how to mitigate risks or explore opportunities.
You can also use the Kanban board to track risks as the project is executed. Create Kanban cards for each individual risk and assign them to an owner who will be responsible for resolving the risk. And that’s just the beginning of how Mission Control can be a handy partner in your risk management efforts!
Contact us today for a demo of how Mission Control can help your organization identify and manage risks better.