Important Aspects of Risk Management

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All project managers worth their salt know the importance of conducting robust risk management.

Without it projects lay themselves open to issues that might not only hurt but may (and can) completely derail them adding to cost and lead time in such a way that renders the project unfeasible.

Whilst the actual process of risk management is well known (gather your risks, review them and develop mitigation strategies) all too often project teams get too blasé about risk and omit the fundamentals.

• Risk management requires sustaining it is not merely a onetime only process.

• Understanding the role that potential impact has in determining what you do.

The role of impact

Most project managers when assessing risk will create some form of risk register or log that is used to capture risks for future review.

Whilst these logs vary in style and content most will include some common elements.

Of these, impact, is one of the important ones! Impact describes what will happen if the risk is realized. For example you may carry a risk that on your IT project that the software may not meet the needs of the customer.

Let’s consider the impact of this for a moment – the customer could – withhold payment, require costly rework at the project teams expense, the project team may be required to do further activities such as more detailed requirements gathering or coding.

Fundamentally the impact will come down to two things –

• additional time required to undertake new tasks and

• additional budget

For many project teams looking to skimp on risk management impact can often be scored in terms of High, Medium, and Low and while this is a crude method it doesn’t really do the job justice. All risks are not created equal and do need different management methods.

Understanding cost and leadtime impact is crucial because it helps you rank your risks and help you prioritize what to do. For example you would not manage a risk which could cost $10 the same way as you’d manage a risk that cost $1,000,000.

Getting into the detail on impact assessment can also help in a number of other ways – for example in developing mitigation strategies and budgets (many projects set aside the funds to cover risks being realized).

Summary

Risk Management is without a doubt one of the most crucial project management over-running on cost and time. The process alone is not enough however and the project team must think carefully about how it deploys the process including important attributes in order to get the most out of the activity.

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Source by Stephen R Martin