For centuries, people have participated in risk management. Our ancestors feuded with other tribes to protect their access to resources. And these days, this practice looks more like washing our hands and using coupons. The stakes might differ, but every person you know participates in risk management.
For example, in project management, we use risk management to handle the uncertainty that can either threaten or boost our projects. And as you learn about this field, you’ll find that there are a lot of elements at play in your project that you cannot control, which makes risk management all the more helpful.
It’s also a vast concept. And so, to better understand, use, and profit from risk management, we have broken down the concept into three parts.
- What is Risk?
- Understanding Risk
- How Risk Management is Applied to Project Management
- Examples of Risk Management
When used correctly, risk management is an effective tool that can save everyone time, money, and energy—especially for those in management positions.
Part 1: Understanding Risk & Risk Management
In the Project Management Institute(PMI) text that covers risk and risk management, they created an umbrella called the “uncertainty performance domain,” under which risk lives as an aspect of uncertainty.
Whenever you ask a group of people, who all have their own thoughts, concerns, needs, and goals, to collaborate on one single plan, you will absolutely run into some speed bumps. There may be hundreds of speed bumps on the way to completing that project. And no one really wants to hand over the reins, which could make reaching collective decisions quite challenging.
Then, you have to factor in situations where none of those participants have any control. There is so little control, in fact, that your part in this play is the very, very last consideration in a lengthy and complicated process. So, it’s not out there to say that keeping things calm can get tricky.
All collaborative work involves some amount of insecurity because nothing about anything is entirely set—at least until it happens. That’s why the PMI highlights terms like uncertainty, ambiguity, complexity, volatility, and risk. And they are all important concepts to understand when managing any joint venture.
So, to make this whole idea easier to digest, we are going to discuss
- What risk is
- The ways risk can become positive or negative
- What risk management is
- The risk management framework
- The benefits of risk management
What is Risk? The PMI’s Definition
Risk is anything that can’t be firmly predicted or controlled. The Project Management Institute, 7th edition, defines risk as “an uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives.”
While these events haven’t happened yet, they can haunt your team and make you, as the project manager, question things and feel all kinds of insecure.
Every project has them. But the ones that are the least haunted by them are those with management who grabbed that bull by the horns to protect the team’s needs, the stakeholder’s investment, and the project’s goals.
Risk can manifest in so many different ways. It can be a shipment that your team needs to come fast but has sketchy tracking information. It can be a tornado that is predicted to hit your warehouse. It can be a crucial team member getting sick at the last minute. It can also be as simple as a contractor finishing their task before the deadline.
No matter how it unfolds, what it looks like, or what it involves, uncertainty—specifically risk—can reach every aspect of every project and change the outcome however it likes.
Risk Can Be Positive or Negative
The strange thing about risk is how it can change. Take the shipment example. If the shipment is late, therefore negatively impacting your project, then the risk becomes a threat. But if the shipment is early, allowing your team to progress ahead of schedule—positively affecting your project—it becomes an opportunity.
Threats in risk management are defined as an event resulting in a negative impact on one or more aspects of your project. Sometimes, there can be so many threats present that a project is rejected before conception is even complete. The opposite can also be true. An organization can decide that the benefits of moving forward far outweigh the threats surrounding the project, and so they move forward.
One aspect of risk often ignored by management teams is how risk can evolve into an opportunity. In this context, an opportunity is an event that, when it happens, has a positive effect on the project and can even move the whole function closer to meeting project objectives.
A risk that becomes an opportunity can look like the public’s unexpected yet positive response to some aspect of the project that the management thought would appear controversial. You just never know.
What is Risk Management?
The seventh edition of the PMBOK defines risk management as “the art and science of identifying, analyzing and responding to risk factors throughout the life of a project and in the best interests of its objectives.” It’s all about keeping things on track and meeting your goals.
And while the term ‘risk management” implies control, this whole practice is actually about preparation. Risk management is rarely reactive and is much more effective when used proactively, ahead of any occurrence.
At this point, we’ve established that risk inside of risk management is anything that can impact your timeline, performance, and budget. It’s generally understood that this practice is best used in the beginning when the project is initiated.
The main point of this concept is all about deciding how you address risk before it ever happens. You want to catch events that can have uncertain endings before they devolve into issues (to control the impact) and before they become opportunities so that you can take advantage of them.
The motto is to minimize threats and maximize opportunities.
This process is very involved when the scale of the project is bigger; conversely, it could be as simple as thought-out lists for smaller projects.
And again, you might think risk management is only for mitigating threats, but it’s vital to remember that it’s also about receiving and taking advantage of opportunities.
Types of Risk For Project Managers
When you boil it down, projects have to face only three kinds of risks.
- Cost. The project goes over budget, often caused by mistakes in estimations.
- Schedule. The project goes over the time allotted, often caused by scope creep or occasional unmanaged additions to the scope.
- Performance. The project’s results are not in line with the quality expectations.
Risks rarely fall outside these categories as these are the most critical parameters of any project.
Risk Management Framework
As the structure companies use to template, carry out, and support risk management, a risk management framework holds the key to how exactly this works. It’s like an instruction manual for how your organization prefers to prepare for, prevent, and respond to risk.
There are seven key aspects to developing your organization’s management strategy when things go either unexpectantly wrong or unexpectedly right. These include
- The risk management plan
- The process for risk identification
- The system for risk analysis
- The methods for response planning
- The plan for risk monitoring and control
- The ideal risk threshold
- The measurement for efficiency in risk management
You might think that all of this is silly or that developing a framework is not really necessary. You need the steps of risk management and none of this other stuff.
But your way of thinking might need to be corrected.
With a framework, you avoid dealing with an incomplete impact evaluation, which means underestimating how many issues an event can create. This means losing more time and money on things you could have managed.
Also, without a risk management framework, you won’t accurately understand the secondary risks and what they will affect. No one will communicate on these issues because no one knows they’re important, and things will get all kinds of messy.
With a framework, you give yourself the gift of awareness and targeted risk identification that supports the success of your project. You also enjoy progress happening as planned, effective communication, and team building that both makes people happy and helps your project run better.
Each of the seven parts of a risk management framework is explained below.
1. Risk Management Plan
Simply put, you need to know what to look for and what to do when you see it. That’s what your plan is for. It includes
- Guidelines
- Project-specific definition of risk
- Possible sources of risk
- Types of risk possible
- How you’ll reduce or address risk
- What you’ll do when these events come to pass
- What the project’s threshold for risk is
You’ll be making this plan more detailed when projects happen on a larger scale.
2. Process For Risk Identification
The first step is admitting you have a problem (or a risk) present. So, you’ll need to collect stakeholders and relevant team members regularly to meet and discuss all the unknowns hanging over the project. The information collected in these settings needs to be stored in an easily-accessible place.
3. Risk Analysis
Compare the project outcome to the potential impact caused by the risk. How is your project going to stand if this event occurs? Decide on things like the probability of occurrence, impact, exposure, and timeframe to understand the extent of this risk as accurately as possible.
4. Response Planning
This one is pretty straightforward. This aspect requires you to consider what your project looks like after a particular risky event has happened. Whether your team will be working to reduce these risks in a single day or over a year, you need to iron out the details of your response before executing anything.
Your response plans should always include
- A description of the risk
- A description of the action taken to reduce risk
- The owner of that response, who is responsible for carrying out that task
- A deadline for completion
5. Risk Monitoring & Control
As the project moves through its life cycle, both problems and opportunities will continue to show up. So, there will need to be a system of continual identification and plan development as well as a system for keeping an eye on risks.
This monitoring system allows you to do the following.
- Check if risk-specific conditions have been provoked
- Watch for risks that are becoming more aggressive as time goes on
- Reevaluate existing risks
- Move on from handled risks to those that have priority
In the same fashion, monitoring uncertain events enables your team to “reclassify” those events as you see fit. You can examine everything from the priority an event demands to its action plan when you have a system of control in place.
6. Your Project’s Risk Threshold
Depending on your project’s objectives, the budget you have to work within, and the necessary completion date, you’ll have to establish your project’s risk threshold. How much risk can your project be exposed to before it’s called off? The management team and stakeholders must decide how much is too much.
7. Measuring Risk Management Efficiency
Thankfully, everything can be measured. That includes how effective your assessment, analysis, and management of risks are. And—depending on the scope and scale of the project—it should be, specifically, towards the end of the project’s lifecycle.
You’d measure by keeping track of how many risks occurred versus how many were identified, you’d see how many risks transpired more than once, and you’d find out how the problems faced compare to the problems that the project prepared for.
For the sake of growth as a project manager, you might also perform what the Project Management Institute refers to as a Risk Audit.
Why is Risk Management So Important?
All too often, management handles risk like every single uncertain event will go up in flames any moment as if they’re always bad things, but that just isn’t the case. Risk management is so important for many reasons.
Namely, it’s important because risk (or events with uncertain outcomes) can turn into incredible opportunities that change the trajectory of the whole process.
When you manage risk properly, you not only have a handle on the things that can go wrong, but you are also able to take advantage of the things that go right—the things that go much better than expected.
There is so much risk involved in a project that it’s easily overwhelming. Whether you are a one-person team or part of a flock of management ready to put out fires at a moment’s notice, there is simply a ton of risk. The other factor to recognize is that all those risks, while often pointed in all different directions, are intertwined and related.
One thing occurs, and it ripples right into another thing.
Without a systematic approach to sorting through that mountain, deciding on the most pressing ones, and choosing the most affordable way forward, you are risking your entire project.
Risk management, without a doubt, is directly related to a project’s cost, timeframe, and quality outcome. This isn’t mentioned to scare you but rather to make you aware of just how insanely important this process is.
Part 2: Risk Management In Project Management
Businesses, enterprises, and organizations of all kinds use risk management practices to save their teams time, energy, and money. But as you can probably tell, how it’s used on a project-to-project basis is quite different.
So, in this part of our risk management guide, we are going to explain the following.
- The project life cycle
- How risk management fits into that
- The two halves of risk management
- How risk management is used in project management
- Each step in the risk management process
- How a risk management consultant might fit into your setup
Now, we don’t believe that you should flip some tables over and start your whole project from scratch. Instead, we recommend slow, steady implementation that you and your team can sustain over time. With that in mind, take what you like and leave the rest.
Project Management Lifecycle, 5 Phases
Depending on who you ask, the phases in the project management lifecycle can total anywhere from four to six. But for the sake of ease, we like to say that there are five. Every detail of your project can easily be filed under one of these phases.
- Initiation
- Planning
- Execution
- Monitoring & Controlling
- Closing
Understanding the lifecycle is vital because of every project’s time crunch. This cannot go on forever. There is a specific beginning—you could even call it the project’s conception, and there is a distinct end.
When you don’t give any single one of these stages the attention, consideration, and effort it deserves, you can easily mess up the entire project.
Explaining The First Half of Risk Management
When you take a look at all the risk management tasks, you’ll find that there are two main themes. There is the assessment theme that is all about seeking, describing, and labeling risk in an effort to plan as precisely as possible. Then, there is the execution and management theme that comes once an event has transpired.
Risk Assessment
When you identify what circumstances can put your project at a disadvantage (or end on a good, surprising note), you’ll find that there are a lot of them. To add to the craziness, they can come in all different forms and can have almost any kind of impact on your project—from cataclysmic meltdown to minor inconvenience.
And even though it might seem like a good idea just to fix the squeakiest wheel, you’ll need to be more strategic than that—hence the need for a risk assessment.
These are used to determine the severity of a risk and assist you in deciding its importance, thus, how high on the list it should go.
Without an assessment, you could easily end up wasting time focusing on events that bore little fruit while ignoring the ones that threatened the very ground you walk on. On the other hand, you could have also just focused on the “threats” while assuming anything positive was a waste of your time, therefore missing out on exciting opportunities.
For clarification, there are two kinds of assessments in risk management. There is quantitative, which is not really possible in a project setting due to the finite timeline, resources, and budget attached. If a project is repeated often (software developers cooperating to build a specific type of program that is their specialty), then quantitative assessments are doable.
The other kind is qualitative. Sadly, even though these are easier to do, they are quite a bit more subjective, making them the less preferred out of the two. No matter how small or rare the project is, qualitative assessments can always be performed quickly. They require fewer resources and are more about holding yourself and your team to a predetermined standard.
Severity, which we explained is what risk assessments determine, can be defined in two ways—sometimes in three ways.
1. Impact
Generally, this is called the consequence. It’s what happens when a risky event transpires. What is going to be affected?
The Project Management Institute has a “generic impact scale” that can help you give more decisive answers to that questions than just, “Oh, this could set us back.”
You can adjust the figure below or add information to each of the impacts to better help explain these outcomes to relevant team members and stakeholders.
Figure 1. Generic Impact Scale from the Project Management Insitute
| 1Very Low | 2Low | 3Medium | 4 High | 5Very High | |
| Cost | Insignificant cost increase | <5% cost increase | 5-10% cost increase | 10-20% cost increase | >20% cost increase |
| Schedule | Insignificant schedule slippage | Overall project slippage <5% | Overall slippage 5-10% | Overall project slippage 10-20% | Overall project slippage >20% |
| Functionality | Functionality decrease is barely noticeable | Minor areas of functionality are affected | Major areas of function are affected | Functionality reduction unacceptable to the client | The project end item is effectively useless |
| Quality | Quality degradation is barely noticeable | Only very demanding applications are affected | Quality reduction requires client approval | Quality reduction unacceptable to the client | The project end item is effectively unusable |
2. Likelihood
The second way the severity of a risk is determined is by assessing the likelihood of the event occurring. For this definition, you have to decide under what circumstances to measure how possible the risk is.
A software development company might have to consider upcoming legislation changes that could heavily impact the project, changing the legality of a feature you are planning to implement. The way that a software developer decides to evaluate risk will depend on all of that and more.
The likelihood of an event is divided into two categories, probability of occurrence and intervention difficulty, which we think are things that should be noted in your assessment to make life easier down the road.
3. Precision
The third definition of severity, which you could argue is optional, is precision, or how much you trust your understanding and knowledge of the potential risk. You could also explain it as the confidence you have in your estimates.
Precision is broken into three classes which are explained below.
Figure 2. Precision definitions
| Low | Estimates of risk effects and likelihood are merely guesses |
| Medium | Enough information is available to provide provisional estimates of risk effects and the likelihood |
| High | Knowledge of risk effects and likelihood is adequate for all practical purposes |
A Note on Risk Assessments
For the record, we understand that this is a lot of mental work, and for some projects, it will be completely unnecessary. But for others, this data could be what saves your project from derailing when something unexpected goes wrong.
And from one project manager to another, something always goes wrong. What defines you is how well you prepare for it.
Furthermore, once you complete an assessment, it’s much, much easier the next time around. Sure, you’ll never have the exact conditions again, but you will know how to break down risk in systems that can be communicated easily to any stakeholders, managers, or team members.
The Second Half of Risk Management
Risk management, as we said before, is mostly about preparation, but that doesn’t negate the importance of your follow-through. When we discussed the “first half” or the preparation theme of risk management, we walked you through some of the details you should consider as you carry out a risk assessment.
All of those details are most applicable in the “second half” because they’ll tie directly into your response or action plans, the management of residual or secondary risk, and how you’ll review and learn from it all.
How Does Risk Management Help with Your Project’s Success?
You may think that project risk management is the process of planning for failure, but that couldn’t be further from the truth. Risk management helps you to identify the things that could arise during the project that could derail it. It doesn’t predict that your project will succumb to these risks. It does the opposite.
A well-designed risk management plan will help make the “unexpected” expected. Through proper identification and planning, your team will be in a great position to respond quickly and efficiently should something amiss come up during the project management process.
Projects are more successful when they include much preparation—everything from general planning to creating goals, assigning tasks, monitoring progress, and making on-the-fly adjustments. Being proactive will always save you both time, money, and energy down the road.
Developing a risk management process is an essential part of this puzzle. Without it, teams will be wholly unprepared for how to respond to the inevitable risks that are bound to come up during the project.
5 Steps of the Risk Management Process
So far, we’ve talked a lot about what factors to consider as you work through the risk management process, but it’s about time we explain what that process looks like. We will note that this process—every step of it actually—is generally ongoing and continues, even in small ways, all throughout the life of the project.
So, even though we are laying this out in steps, they are more specific to individuals or categories of risk than to say, “You’ll do this process once throughout your entire project,” because that would just be wrong.
1. Risk Planning
Before the project ever begins, you need to sit down and evaluate what can threaten it and plan accordingly. This should happen in a meeting with all key stakeholders and project participants present (if possible) and will empower you to develop a clear understanding of
- The project’s metrics
- How sensitive those metrics are
- The project’s risk tolerance (how much each metric can shift without dangering the project)
- How the process of project completion will look
- What risks can affect which parts of the process
- How data is recorded
- How and where risk-related data is documented
During this step, we suggest you get creative. The larger the project, the more risks you should think about and plan for. Have everyone brainstorm and yell out even the most unlikely of scenarios. And then, just to be safe, discuss what you would do in that situation.
Even if they seem impossible, identifying potential setbacks will help every single team member and stakeholder be better at detecting risks and thus preventing them.
2. Risk Identification
You can’t fix something that you don’t identify as a problem. So, this step is where you do exactly that. You could also see this as your “call to action” that spurs the measures decided upon in the previous step.
Also, more often than not, risks and risk events are intertwined. One easily bleeds into the other.
And the old saying “when it rains, it pours” is very, very true in this context. Without proper identification that can spur plans into action, you could be signing yourself up for much more than that one thing. It can snowball into a series of risks that can kill your project faster than you can blink.
All this is to say you need a system of risk identification that can allow you and your team to see them coming.
3. Risk Assessment
And while this step is technically an extension of Step 2, it still deserves some attention. A risk assessment is all about determining the severity of a risk, as we discussed before. It includes asking the person who found the risk to use your system of assessment to ascertain how pressing this issue (or opportunity) is.
Be aware that some who are tasked with labeling risk will equate more importance to it than necessary because the threatened aspect of their project is linked to their role—which makes them feel threatened.
You might notice someone doing this and ask them to work through the assessment again. You might even work through it with them and help them see that there isn’t as much of a threat as they once saw, allowing for a more accurate interpretation of the risk event.
So, to clarify, this step includes
- Assessing the severity of the risk
- Assigning priority to the risk
- Determine the potential impact of risk
- Determine how likely a risk event is to occur
- Decide how much you trust all of these estimations
These efforts will save you time wasted on fixing things that simply aren’t that important. You can also take this as an opportunity to look for risks with positive outcomes (instead of just always searching for fires to put out).
The most crucial aspect of this step is deciding how much exposure to this uncertainty is acceptable while still progressing toward your project’s goals.
4. Event Response
Uncertainty, as we discussed before, can positively or negatively impact your project. An event with a positive result is called an opportunity, and an event with a negative result is called a threat.
Your response to any event is going to depend on the details of your assessment and the potential outcome.
Threats
The 7th edition PMBOK states there are five ways to handle threats. Those include
- Avoid – completely eliminate the threat from the project’s landscape.
- Escalate – move the responsibility of the threat outside of the control of the project manager.
- Transfer – place responsibility for the threat to a third party to bear the impact.
- Mitigate – reduce the impact of the threat with proactive or reactive action.
- Accept – after the event has occurred, management acknowledges its existence.
To clarify, acceptance can also mean that a contingency plan that was developed before the event occurred is enacted, or it can mean that there is “passive acceptance,” which simply means doing nothing.
Opportunities
Yes, sometimes risky-looking events can be good things, and the PMBOK discusses five ways to deal with opportunity. Those include
- Exploit – the team works to ensure the opportunity occurs to the utmost advantage of the project.
- Escalate – management moves the control of the result out of the project managers hand’s because of magnitude.
- Share – spreading ownership of the opportunity to the group best able to maximize benefit.
- Enhance – everyone works to increase the likelihood of occurrence, and early enhancement is more effective.
- Accept – concede to the event happening and develop no proactive plan.
Again, while uncertain events with negative are much more likely to get attention, positive events can also have incredible impacts on the project.
5. Monitoring and Control
As you come to understand, use, and hone this system, you’ll find that monitoring and controlling is especially crucial. Some risks are ongoing and need to be followed closely throughout the life of the project.
And while each step of risk management is useful, this step is focused specifically on
- Detecting triggering events
- Monitoring for environmental changes that can provoke uncertain events
- Tracking risks to ensure the safety of the project
We (and the Project Management Institute) recommend that you record and display data on risks you monitor and those considered handled. Make a note of which are still open and possible. Color-code those that are the most threatening or active.
By doing this, you allow everyone to be alert to these events.
Risk Management Consultant For Project Managers
When discussing risk management, we often hear leadership consider bringing on consultants because it’s such a vast concept. Depending on the scale of the project, one category of risk could threaten the entire company, so it makes to bring in someone specializing in damage control on a firm-wide level.
They cannot only act as a neutral third party, but they can also view your project from a distance and see cracks that you simply can’t.
These people are often called risk mitigation experts and are very useful.
They can provide feedback on bigger-picture concepts like your project infrastructure and are equipt to bring the risk down to a tolerable level. These consultants will often look at your current processes and data and talk to your team to find the gaps.
We heavily recommend this assistance, especially on larger projects prone to gaps. Whether you are closing in on the end of your project or just starting planning, sometimes an outside perspective can make all the difference.
Part 3: Beyond Project Management, Applications of RM
The third and final part of our risk management guide concentrates on examples of how risk management is applied in different settings and industries. At this point, you might understand what this process looks like in general but not in your field.
Below, we attempt to do just that.
Other Types of Risk Management
As we were saying, there are not only different applications of risk management but also different types. The other kinds of risk management discussed include
- Enterprise Risk Management
- Security Risk Management
- Third-Party Risk Management
In this section, we will explain each one and how they differ from “traditional” risk management, which we discuss in the rest of this piece.
Enterprise Risk Management
Whereas traditional addresses project or department-specific risk that is thus controlled and endured by one section of an organization, enterprise risk management takes a bigger focus. Instead, ERM looks at what threats and opportunities the entire organization faces.
It’s a firm-wide approach which means that responses are for the benefit of the firm. This angle often leaves department leaders feeling neglected because their position is not always the priority, as it is with traditional.
The benefit of this type is that it protects the entire company, business, or organization, which is something that traditional risk management doesn’t always do.
Security Risk Management
As the name implies, this type of risk management focuses solely on security-related threats and opportunities and meeting them as effectively as possible. This approach always intends to prevent breaches, minimize vulnerabilities, and maximize regulatory compliance.
SRM is helpful in situations with sensitive data or property that makes them a target for theft just by possessing it. IT teams focused on data storage are great examples of security risk management.
Third-Party Risk Management
Third-party risk management is something everyone uses, even though few realize it. Bank accounts, PR firms, and lawyers are just a few common forms of third-party risk management. These are specialized groups whose entire purpose is to handle one type of risk—often very expensive types of risk.
Examples of Using RM
Risk management is a protective concept every professional uses in every setting. In personal settings, it might look like “looking both ways” before you cross the road. It can be checking the expiration date on some noodles you found in the back of the pantry. It can even look like warming up your body before exercise.
In professional settings, everyone uses it, too. Below, we explain industry-related examples of risk management and why it truly pays off to be prepared.
Supply Chain Risk Management
Not all products are created equally, and delivering quality items to the market can be a very, very complicated process. Communicating with manufacturers and staying abreast of operational changes could easily be considered acts of risk management. But in this setting, it specifically looks like being alert to issues regarding the supply or development of a product.
Cyber Risk Management
Above, we mentioned IT departments being a great example of risk management, and we were not lying. Data can be worth its weight in gold, and many out there are willing to steal it, especially any data considered “sensitive.” By having a specialized group make a concentrated effort to protect that information, you save yourself from facing the consequences of data breaches.
Healthcare Risk Management
A lot of healthcare is risk management. Why isn’t smoking recommended? It’s to manage the risks associated with that action. But in a business setting, HIPPA laws are an example of risk management. By protecting your patients’ health information, you protect your organization from the hammer that is HIPPA enforcement.
Another application of risk management in healthcare is sanitation and sterilization of spaces and tools used in care.
Financial Risk Management
You might be familiar with the two-step verification process whenever you sign into accounts on new, unauthorized devices. Your bank app might use the Face ID feature to allow you to sign in. When applying for loans, they run credit checks to reduce the risk of non-payment. Risk management in finance might also look like investing in low-risk index funds that gently grow over time.
Insurance Risk Management
Insurance agencies will hand over all of your information to an underwriter to reduce the risk of covering you. Every agency has an extensive process identifying who they will and will not cover. A different example of risk management in insurance is requiring homeowners to replace the roof before extending the home’s coverage for the next however many years.
Climate Risk Management
Before we knew better, everyone was using aerosol products all the time. The movie Hairspray is an incredible demonstration of this. Then, we learned that aerosol is one of the most potent greenhouse gases and collectively stopped using it.
A more commercial example of climate risk management is “erosion control” in south-eastern states which means having holding ponds within a certain distance to every Publix you’ll ever see (unless it’s on a hill).
Corporate Risk Management
Corporate risk management often looks a lot like enterprise risk management in that they tackle issues more comprehensively or company-wide. But a specific example of risk management in a corporate setting is using background checks in the onboarding process to reduce the amount of theft the organization faces.
Why Risk Management is SO Necessary for Project Management
Risks are bound to pop up in any project, and they don’t discriminate. It doesn’t matter what industry you’re in or what type of project you’re undertaking. A project manager (who handles all possibilities, accidents, and emergencies) must incorporate prospective issues into their management strategy. It’s integral at this point.
How you and your team respond to these risks as they arise will ultimately determine how effective the project will be—and whether it can be completed on time.
Time is a hot commodity in project management. It’s something you constantly battle.
Having a risk management process empowers leaders with the right tools so they can first properly identify risks and then deal with them effectively and efficiently. With a clearly-defined project risk management plan, it becomes much easier to mitigate threats when they arise.
This plan will serve as a blueprint for how your team should deal with challenges. It will serve as a blueprint for how your team should deal with challenges. It will serve as a blueprint for how your team should deal with challenges.
If they aren’t equipped with the proper tools to deal with the risks, they are likelier to make a poor decision. Risk management helps improve the decision-making process by prepping people for the potential of what’s to come. From an overall business standpoint, planning for inevitable threats and roadblocks allows the organization to become successful.
Planning is EVERYTHING in Project Management
Business owners and managers like to think that every project they take on will succeed. It’s great to have confidence in your ability and that of your team to take on a challenge and succeed. This doesn’t mean you should ignore the fact that even the most successful projects likely faced many challenges along the way.
Don’t assume that your project will ultimately succeed just based on talent or past performance alone.
Project managers who have a risk management plan in place will never regret going through the creation, development, and deployment of that plan. Make sure you include
- Detailed descriptions of potential risks collected from multiple sources that have eyes on the project
- A list of who is going to respond, along with a system for keeping those responders accountable
- A plan for how each responder needs to proceed in the face of the issue
Understand that risks are inevitable, but they don’t have to be detrimental. If you prepare properly by undertaking a comprehensive project risk management plan, you’ll be ready to take on whatever comes your team’s way.
Here at A.McBeth, Inc., we know it’s better to pop our thinking caps open, receive new ideas, and use them on occasion than act like we know everything. Project management is pretty uncomfortable with that attitude.
That’s why we are offering up new (and old) ideas all month long, so sign up to be notified next time. You won’t want to miss it.
