Effective risk management underpins successful project delivery. Because risk is related to uncertainty, project risks always refers to a future event. So the time spent in the planning phase thinking about possible risks and how to deal with them will have a direct impact on your ability to monitor and control risk during project delivery. Risks are present in all projects regardless of their size and complexity and need to be appropriately managed. Simply hoping that something untoward won't happen isn't a good way to proactively manage risk.
Well, the process that is most widely used originates from an international standard on risk management and consists of six key steps:-
a) The first step is to understand the context of your project and to confirm your project objectives, thereby knowing what is to be achieved.
b) The second step is risk identification. Risk identification entails the identification of all risks that may impact on achieving your project objectives. It's always a good idea to include some experienced stakeholders together with your project team to help you identify potential risks.
c) The third step, in this process, requires you to undertake a risk assessment. This means that you will need to prioritise the risks by assessing their severity using a combination of both likelihood and the impact that each risk may have on your objectives should they eventuate. Bear in mind, some risks might appear to have a very low likelihood of occurring. But if they do occur, the impact might be catastrophic.
d) The fourth step is to consider and plan risk responses. This is the process where we develop risk response strategies that will aim to address the impact of major risks on the project objectives and your success criteria. Risks can be responded to in four ways. Risk can be accepted. Risk can be transferred to another party such as a contractor or client. Risk can be mitigated or reduced. Or risk can be avoided. Each of the specific risk responses should correspond with the priority and potential impact of the risk.
e) The fifth step requires you to monitor and review risks. Here you'll need to monitor the risks that have been identified to determine if they have occurred or not. If they have not yet occurred consider afresh whether the likelihood and impact may have changed since the last risk review. Any new risks should also be identified at this point. Remember, risk monitoring review is an ongoing process not a once off tick-the-box activity.
f) The final step of the risk management process is to communicate the outcomes to the relevant stakeholders to assist their decision making.
Well, let's see if we can contextualise the process by examining how risk may impact Ann's wedding planning project. There's a whole range of issues that may impact the event Ann is planning. So she will need to identify and assess potential risks and then consider appropriate risk responses. Based on Ann's experience, she'll already be aware of many of the typical risks that are likely to occur such as unfavourable weather on the day. And then there are some risks that even an experienced event manager like Ann would be difficult to anticipate, such as the bride or groom getting cold feet on the big day. These are examples of different risks for which Ann will need to identify, assess and develop risk responses to. By following the risk management process, Ann is able to control, reduce, and possibly avoid the impact of these risks through developing risk contingencies or fallback options. Although Ann is the wedding planner, her business model relies on outsourcing many of the activities that she is responsible for.
These outsourced activities include the making of the wedding dress, arranging the catering, making the wedding cake, the flower arrangements, and all other decorations at the venue. Managing suppliers and contractors -- also known as procurement -- therefore poses another area of potential risk for Ann. Whenever there is a dependence on external suppliers, the possibility exists that one or more of these suppliers may not fulfil the deliverables on time or at the specified cost. Ann's response might be to put some contingencies in place in case one or more of these suppliers do not complete their required deliverables on schedule. A contingency example in this instance might be bringing the due date forward for suppliers, such as the wedding dress and the wedding cake, to ensure they complete what is required well before the actual date of the wedding. It is wise for any project manager to build in a buffer period to consolidate any external supply deliverables before the date they are required in the project.
This is even more so when the specific deliverable has a knock-on effect, in other words, when one activity is dependent on another being completed, thus causing delays on the critical path. Clearly, Ann will benefit by using a systematic approach to ensure her risk management plan is sufficiently robust. To wrap this up then, make sure you take enough time to identify the risks in your project, both those that you can and those that you cannot control. Second, assess the likelihood and impact of the risk occurring and the impact on your project if the risk does occur. And finally, put a strategy in place for each risk by deciding whether you are prepared to accept the risk, transfer the risk, reduce the risk, or avoid the risk entirely.
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