Risk and uncertainty, being an inevitable part of all projects, cannot be purely eliminated. Some say that without taking risks, there is no success. At every point of interaction, risks are an inherent feature that will lead to a drastic end if not properly managed. We can’t predict the future, so we won’t know what exactly is on our way.
Risks changes according to the nature and scale of business. If you are a large scale firm, the risks you face may differ from those of a small and medium business. Everyone wishes to accomplish their project goals smoothly and profitable without facing any risks and uncertainty.
But How can we do it?
Risk Management in Project Management
The only way we can accomplish our project goals is by properly managing both projects and risks. Risk Management is an essential process as project management is.
So you all must be thinking about what exactly risk management in project management is.
What is Risk Management in Projects?
It is a process to identify, analyse, prioritise, and mitigate/prevent all the risks that may occur in a project. This is done to take the necessary step to either face it or reduce its impact.
What are the Risks in projects?
Risks are all things that affect the timeline, budget or performance of your projects. Therefore, we won’t complete our projects without proper risk management in project management.
For an effective risk management strategy, we need a clear understanding of our projects. We should know our project goals/objectives and all the barriers we need to cross in order to achieve them. It is really understanding the project, what does it stands for and all the threats that may occur while accomplishing the goals. Typically all these activities are done by a project manager.
Types of Risks in field Projects
There are many kinds of risks in project management, and it’s not possible for us to list every one of them. So what we can do is list out some of the common risks that are faced by most businesses.
Common risks faced by the business while managing field projects throughout their lifecycle are:
Performance risks are all the risks that affect the performance of our projects. These risks usually, upon completion of the project, will fail to perform as intended, or the goal isn’t met. Performance risks also lead to both cost and schedule risks.
These risks are events that impact the budget costs. They may occur due to improper budgeting or cost estimation. Costs risks may also lead to performance risks as the project cannot be performed within the stated budget. They also lead to schedule risks as the project will be delayed due to insufficient funds.
Environmental, Health, or Safety Risks –
These may occur if the field project leads to any environmental or health hazard or even hidden threats that uncover during project execution. These risks may also lead to performance, cost or even schedule risks. If the risk is severe, it will impact your projects as well as your business.
The risks that extend the project duration more than the scheduled time are schedule risks. Feature creep is a common reason for project delays and schedule issues. Schedule risks aren’t severe in nature, but they can affect both the cost and performance of the project. Performance issues arise as the quality of the project will diminish as the time taken to complete overlaps. And more budget is needed to finish the project as it takes more time to complete.
This is a severe risk where we tend to lose the public or stakeholders support to complete the project. If the stakeholders lose interest in the project and stop supporting, it would be hard for us to complete the project with quality within the allotted budget.
As we’ve seen, the different kinds of risk that affect our project success. We had come to know that risk management is crucial for the successful implementation of project goals. So next comes the need to properly implement a risk management strategy. Here are few elements of the risk management process that need to be done for achieving great project results.
Key Elements of Risk Management Process
A risk management framework is essential for proper risk management and proper project completion. Ignoring the risks doesn’t make them disappear. It is advisable that you identify the risk, find its root and respond to it. Risks can be of different types like positive/negative, desirable/undesirable. Identify them and respond accordingly. With proper risk management, we will know what is prepared for whatever lies behind the next tree.
The risk management process has three key elements that form the entire process. They are:
You might be thinking about why risk assessment is first among the elements. It’s better if we know where exactly we stand. Therefore the first step in the risk management process is making an inventory of all the opportunities and threats you encounter.
If you don’t know what risk assessment is, Risk assessment is a structured brainstorming way of finding most of the risk you encounter. You can implement different ideas/practices to your risk assessment. Only after knowing the reality of our position/situation, we will in a position to make decisions or respond to the risks wisely.
A proper risk assessment will help you recognise many potential risks that you haven’t even realised. This will help you steer your activities in the right direction.
The next element steps in soon after a risk assessment is the risk repository. You need to store all your assessed and prioritised risk. Otherwise, all your findings will be for nothing. The word risk repository might be confusing, but it’s simply an excel or spreadsheet, for which you can download and use templates. You can prioritise the risk, mention who owns the stake and how they will address the threat. This will help you track and respond to the risks you face.
Risk repository is a dynamic tool for you to list down all the risks, prioritise them, and mention all other details pertaining to the relevant risk. Your staff can check whether the threat has been owned and addressed, or its priority has to be changed to low/high.
After recording and prioritising all the risks, the next step is to respond to them. The response can be different for all risks like some would be avoided, and for others, actions would be taken. Taking measures to mitigate or eliminate the risk is the last step in the risk management process. Then also, the risk management process doesn’t come to an end. This is where the third key element of the risk management process comes to life.
After taking actions and mitigating the risks, all the above-said elements are repeated throughout the life of a business. Because if we recognise our risks and take active measures to face them, then there won’t be anything stopping you from reaching your success. Your staffs can maintain the repository assess new risks when they are identified, prioritise them accordingly, respond and mitigate/eliminate them. This is a virtual cycle that can be/ has to follow throughout the business life, and not just for a particular project. With the proper track of all of this, achieving project goals and desired results won’t be as hard as it was.
Steps in the Risk Management process
This is where we divide the three key elements of the risk management process into few steps that you need to follow:
This is the most important task where we get to know where our position in managing risk is. It is brainstorming all the risks and opportunities that you encounter or may face in future. Go through all the objective of the project. Understand the project inside out; only then we can find out the risks that may occur while carrying out the project activities.
Analysing risk is hectic as there will be no sufficient data. Some organisation have a framework that stores such data for future purposes. Only when we know what kind of risk we are facing, we’ll be able to prioritise them and respond. After identifying the risk, we analyse them to know the root and other kinds of stuff, then comes prioritising.
After the above two steps, it’s time to store/note them down on a risk repository, i.e. excel sheet or spreadsheet and prioritise them. It can be done in such a manner that the risks with the highest priority are at the top and one with the lowest priority at the end. So it would be easy to change the higher risky ones after mitigating them.
All this hard work of identifying and analysing will be for nothing if it isn’t assigned to a person who can oversee the risk. Such an owner is necessary as (s)he will be there monitoring the risk. That particular person may be more talented and knowledgeable about that particular task. And assigning task will help you segregate and assign different persons according to the risks.
Without a proper response to the risk there, won’t be any mitigation/elimination. Not all risk needs action. It’s best that some risks are just avoided, or no actions are taken. And some critical actions are taken to mitigate them. Determine the action with your team and respond accordingly.
After all the above tasks are done, it becomes necessary to monitor them to know if the strategy taken has worked or not. If it has, then the priority can be changed in the spreadsheet and continue with the cycle.
With this blog, we hope that you have understood how risk management plays an important role in field project management. It is necessary to implement a risk management strategy/framework for your business if you want to achieve your project goals.
We hope that you are doing good. Thank you for reading our blog, and have a nice day.