This informal CPD article ‘Risk Management Principles’ was provided by London Optimum Training & Consultancy (LOTC), a UK-based training and consultancy provider committed to professional development and organisational performance.
Even in well-planned projects, something will go wrong. Unexpected events can throw a project off course and put key objectives at risk. If you identify critical risks in advance and assess their significance to the success of the project, you can start to plan accordingly (1). As a result, in project management, good project managers should apply some basic risk management principles to their project and plans.
Identify Risks
Brainstorm with your project team to identify the risks that could threaten or delay the whole project. If someone says, “We’ve never done this before”, that’s a sign that you need to think about risks. If you’ve never done this task before, you won’t see the problems until they hit you. Think out the risks beforehand. Similarly, comments like, “This always goes wrong”, suggest it’s worth identifying why past issues occurred and putting some preventive measures in place to stop them happening again (2). It’s interesting to note that you should check your plan for things you’re unsure about or assumptions you’ve made. Don’t just hope everything works out – planning for potential problems is a key part of risk management training and understanding what is risk in a business.
Identify Causes
Once you’ve identified these areas of concern, start thinking about what could go wrong. Be specific, detailed and precise, as this will help you later on in planning actions. Make up a list, which will be your ‘risk register’ (3). Review this regularly. For each potential problem, assess the probability and impact of each threat. This is because risk is made up of two distinct parts - the chance of something happening and the impact of it (4).
To plan effective actions, you now need to identify the likely cause of top potential problems. For each potential problem, identify what you think the likely cause could be. Try to be as specific as possible. You might even try to group the likely causes to give you an understanding of where the risks originate. So for each potential problem, identify the likely cause and rate their probability as High, Medium or Low.
Take Action
Risk management is all about action. Too often, people complete a risk assessment but forget that the real work comes afterward. You actually have to do something about the risks. As a project manager, there are two types of actions you can take, and each affects risks in a different way – preventive actions and mitigating actions (5). Preventive actions are steps you take to stop problems from happening. You need to plan them ahead and make changes to the project plan. You also need to decide how big the change will be, how much it will cost, how it will affect the project, and who will do it. Mitigating actions are steps you take to reduce the impact if a problem does happen. You also plan and prepare for them in advance, but you might never need to use them. When planning your project, make sure you set aside time for these back-up plan and add them to your risk register.
Final Thoughts
Maintaining an overview of the risks that might threaten your project is critical to the project’s success or failure. You will need to establish a simple system that will make it immediately apparent where the high risks are and when they have happened. In concluding, risk management is about planning ahead and taking action. By spotting problems early, thinking about what might go wrong and making back-up plans, project managers can avoid surprises and keep the project on track. Checking your risks regularly and updating your risk register helps make sure the project meets its aims (6).
We hope this article was helpful. For more information from London Optimum Training & Consultancy, please visit their CPD Member Directory page. Alternatively, you can go to the CPD Industry Hubs for more articles, courses and events relevant to your Continuing Professional Development requirements.
REFERENCES
(1) Project Management Institute (PMI). (2021). A Guide to the Project Management Body of Knowledge (PMBOK® Guide) (7th ed.). Project Management Institute, Inc.
(2) Hillson, D. (2017). The Risk Management Handbook: A Practical Guide to Managing the Multiple Dimensions of Risk. Kogan Page Publishers.
(3) Kendrick, T. (2015). Identifying and Managing Project Risk: Essential Tools for Failure-Proofing Your Project. AMACOM.
(4) Hopkin, P. (2018). Fundamentals of Risk Management: Understanding, Evaluating and Implementing Effective Risk Management. Kogan Page Publishers.
(5) Kerzner, H. (2017). Project Management: A Systems Approach to Planning, Scheduling, and Controlling (12th ed.). Wiley.
(6) Chapman, C., & Ward, S. (2003). Project Risk Management: Processes, Techniques and Insights. Wiley.
