Successful project managers always have a Risk Management Plan to avoid fires on their projects. That’s much better than putting out the flames after they have ignited. These PMs don’t need “all-hands” emergency meetings when something unexpected happens. They don’t need to bring all project work to a halt and give people new tasks to respond to a crisis. Instead, at the beginning of a project they design a Risk Management Plan that includes risk identification, risk analysis, risk strategy and risk response planning. They identify the most likely risks that will significantly impact the project and they plan for dealing with them. Then there is no emergency. There is no frantic reassignment of duties. The project team simply executes the Risk Management Plan they developed months before. Risk Management Main Page
Project managers who skip the Risk Management Plan do so because the sponsor wants them to start work quickly without “wasting time” on things like risk management. This will probably doom the PM to fighting fires for the rest of the project. Even on a small project, you can undertake a simple risk assessment process. By investing as little as an hour at the beginning of the project, you’ll possibly save dozens of hours later. You can use the project risk management steps below with your team and/or stakeholders.
Risk Management Plan in Theory
The Risk Management Plan is a concept with a very sound foundation. It’s proven that the cost of responding to unanticipated problems is always much higher and more disruptive than the cost of implementing risk strategies that you planned in advance. Further, if you keep the scale and cost of your risk management efforts in proportion to the scale of the project and the risks you are avoiding, a risk management more than pays for itself.
Risk Management Plan in Practice
Project managers routinely feel a great deal of pressure to start work on a project quickly since many executives think a Risk Management Plan is simply bureaucratic paper shuffling processes with no real-world pay off. There is some truth to that assumption, particularly in bureaucratic organizations where any activity like risk management is an opportunity for more papers, more procedures and endless meetings. In addition, there is the fantasy that good project managers are good firefighters so spending time and money on risk management is a waste of both. When bad risks flare up; you just fight the fires. Project Risk Management
Risk Management Plan for Three Different Sized Projects
Small Project Plans- Done within your organization for one manager or your boss.
Medium Project Plans- Affects multiple departments within your organization or done for customers/clients.
Strategic Project Plans- Affects the entire organization or its customers and has long term effects.
Risk Management Plan #1: Risk Assessment
Small Project Plans- You may limit the entire risk management effort to 30-60 minutes. The tasks are to identify risks and plan risk responses for 2-3 major risks.
Medium Project Plans- You would add qualitative risk analysis on 10 to 20 significant risks. Perhaps you would do quantitative risk analysis on the 2 to 3 biggest risks. The aim of the risk analyses is to develop cost data as justification for your risk responses.
Strategic Project Plans- The scale of the project and the consequences of failure justify an extensive Risk Management Plan. Spending several weeks and over $10,000 on risk analysis is routine. It is normal to hire outside experts to assess the risks quantitatively.
Risk Management Plan #2: Identify Risks
Small Project Plans- Risk identification could be done over coffee with the sponsor and a few key stakeholders identifying key threats and opportunities. Remember that not all risks are bad.
Medium Project Plans- Risk identification is usually broken up by major project deliverables with separate groups working through the identification process for each. The project manager provides each group with the risk categories they should address.
Strategic Project Plans- The project scale justifies the use of multiple teams with each assigned one or more categories of risk. These are grouped by risk type (regulatory, competitive, technological, etc.) or the risks associated with a specific deliverable (facility construction, systems development, personnel etc.).
Risk Management Plan #3: Qualitative Risk Analysis
Small Project Plans- None
Medium Project Plans- Use qualitative analysis for all risks.
Strategic Project Plans- Use qualitative analysis as a screening and prioritizing tool to identify risks with large expected value and to justify more expensive quantitative analysis.
Risk Management Plan #4: Quantitative Risk Analysis
Small Project Plans- None
Medium Project Plans- Only for very significant risks or opportunities.
Strategic Project Plans- Used to justify risk responses that cost a great deal of time or money.
Risk Management Plan #5: Risk Response Plan
Small Project Plans- Short statement of how you will respond to each risk if it occurs.
Medium Project Plans & Strategic Project Plans- More detailed set of risk responses using one or more of the following strategies: avoidance, mitigation, transference or acceptance with a contingency plan. You may combine all four of these risk reduction strategies in sophisticated responses. You will implement careful monitoring of the project using risk triggers for early warning. Risk Strategy
Risk Management Plan & “Best Practices” In the Real World
A slow education process regarding the Risk Management Plan works best with executives. Savvy project managers make a case for doing a limited amount of risk management by using examples from previous projects where they could have avoided delays and cost overruns with some risk management. Wise executives respond well to those examples, particularly seeing data from previous projects. Even the most skeptical sponsor will usually listen to arguments about the risks’ damage to project completion dates and budgets.