How To

Using Project Management And Risk Management For Your Business

project manager

Risk is an inescapable aspect of businesses. Due to digitization, among other factors, organizations now face newer and potentially more severe risks. For an organization to thrive, nay, survive, its leadership must be able to manage risks effectively.

Fortunately, thanks to ever-improving computing capabilities, businesses are now able to evaluate risks much better than before. By adopting risk management for projects, organizations can:

  • Identify risks that may not be evident
  • Give crucial insight to guide board members
  • Prepare better for risks
  • Clearly define regulatory requirements

By managing risks effectively, a company can reduce its liabilities. This is why more and more organizations are incorporating risk management practices in their projects.

Project Risk Management

Risks are any possible occurrences that may affect processes, technology, resources, or the members of your team during a project’s lifecycle. Project risk management involves identification, analysis, and mitigating or capitalizing on risks.

Though risks are often perceived as events that may harm a project, there are also positive risks. These are the ones that present an opportunity that will help you deliver more than expected with your projects.

The goal of project risk management is preventing negative risks from occurring while creating conditions that will enable positive risks to take place.

How to Manage Risks Effectively

As a project manager, your ability to manage risks effectively can have a considerable impact on the company’s overall performance. The ability to foresee risks is a crucial skill that’s developed by adopting strict risk management practices in every project.

To ensure that the risk management process proceeds smoothly, you should use a risk assessment matrix and follow the following tips.

Set a Risk Management Framework

For your company to manage risks effectively, there must be an organizational framework set by the administration. It should have clear guidelines on how to approach risk management.

This should be followed up by staff training to ensure that they have the necessary skills to identify risks. From here, set up measures to encourage them to put their training into practice. Doing so will help them improve their risk management skills while setting a new culture within the organization.

Share Risks

The risk management process is not a one-person job. For consistent and effective risk management, individuals should communicate potential risks to the rest of the team. This is because one person may identify the risk, but it does not necessarily mean they are the best equipped to help the organization mitigate or capitalize on it.

To help you with this, you should organize risk brainstorming sessions. As the project manager, it is your responsibility to ensure that each member of your team is comfortable sharing ideas.

Prioritize Risks

Not all risks will have the same effect on your project. Once you have identified the potential risks to your project, take time to analyze each risk. Analyze it on multiple levels to have a clear picture of the effects it could have.

Therefore, you should classify your risks according to their likelihood of occurring and based on the potential impact they may have on the project. Taking the following steps will help you prioritize the risks:

  • Giving each risk a score of between 1 to 5 depending on the likelihood of their occurrence
  • Assigning each risk a rating of between 1 to 5 based on the potential impact
  • Assigning each risk a priority score of between 1 to 5
  • Determine at which stage each risk is likely to occur

Some risks may seem negligible but may have a significant impact on the project. Through risk analysis and prioritization, you will avoid surprises along the way. Accurate risk analysis is what sets effective project managers from the rest of the pack.

Setup Risk Responses Early

This is arguably the most crucial stage of project risk management. It determines whether negative risks are averted, and positive risks are exploited. Once you have prioritized the risks, define the necessary steps you need to take for each.

Here, you can take one of three courses of action depending on the risk:

  • Risk acceptance- This is for risks that are difficult to mitigate or those that will have minimal effects
  • Risk Avoidance- This involves manipulating the project to affect the probability of a risk occurring in a way that favors you
  • Risk Minimization- This involves influencing the factors that may lead to the risk in your favor

Risk Management Is a Continuous Process

Risks can be managed but not eliminated. Therefore, the best way to ensure that you get a desirable result with every risk is to monitor it until the project is completed. After every project, have your team discuss the risks that were involved. The goal is to find out if there were additional steps that would have been taken.

The findings you make should be recorded and shares with the whole team. This will ensure that each of them will be better prepared is similar risks arise in the future.

 

PM Today Contributor
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PM Today Contributor
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Larry Putnam Jr