Many times it so happens that a project is delayed or needs extra money in order to complete the work. However, after completing the project, when the organization performs the debrief, they see that many of the reasons that cause such problems can be avoided by proper advanced planning- i.e. by adopting risk management principles.
A risk management plan is a plan that identifies future risks on a project and prepares a contingency plan to deal with them. Many professionals think that this plan is a separate and isolated plan. However, this is a wrong assumption. A risk management plan is an integral part of the project management plan and it is developed along with it. This plan defines the guidelines on how you will identify project risks and techniques to manage them.
The objective of this plan is to minimize the impact of threats and increase the probabilities of opportunities.
Three steps are required to develop the project risk management plan. These steps are as follows:
1. Identify Project Risks
The first step is to identify the project risks. Here, you will take help from your team members. Together you will identify the project risks. Afterwards, you will go to other project stakeholders to brainstorm more risks. You will also go through any "lesson learned" documents from your files from previous similar projects completed by your organization.
Once you complete this step, you will note all this information into the "risk register."
2. Analyze Identified Project Risks
In the second step, you will analyze all identified project risks. This step is required so that you can rank and prioritize the risks. It will help you to prepare the contingency plan to manage them.
Here you will determine the probability of the risks happening along with its impact on the project. This if followed by ranking and prioritizing the risks.
Risk analysis is a people-oriented process and in this process you ask the experts [and other contractors] their opinions Be very careful while considering their opinions into the risk analysis calculations.
After completing this process, you will again update the risk register.
3. Plan Responses to Manage Identified Risks
In the third and final step, you will plan the responses to manage the identified risks. Risks can be divided into two categories: opportunities and threats. You have to plan response strategies for both. Some common strategies are as follows:
- Accept: Here, you simply accept the risk. You decide to manage this risk at the moment it happens. This type of strategy can be applied with both types of risks; e.g. threats and opportunities.
- Avoid: In this strategy, you try to escape the risk. You change the project plan or the scope of the work so that this risk could be avoided. This strategy is used with the threats.
- Mitigate: Here, you will create a strategy to deal with the risk so that the effect of the risk could be minimized. This type of strategy is used with the threats.
- Enhance: In this type of strategy, you try to increase the probability of happening the event so that you could realize it. This strategy is used with the opportunities.
The project risk management is an iterative process and you have to continuously look for any new risks throughout the project life cycle. If you find any new risk then you have to repeat all these processes again as described in this article to manage the newly identified risk.
By Fahad Usmani
Photography by Photo Rack
Article author Fahad Usmani, PMP, PMI-RMP is a blogger on Project Management topics. He writes on his blog at http://pmstudycircle.com to help professional to pass the PMP Exam. Visit his blog to learn about various PMP Exam Study Notes.
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