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Project Risk Management

Dick Billows, PMP

Dick Billows, PMP
CEO 4pm.com
Dick’s Books on Amazon

You should spend some time doing Project Risk Management even if your project is small.  Let’s say your boss is the sponsor and your project has just two team members. That means you will be completing tasks as well as performing project manager duties.  Most projects are small like this but you still should perform some Project Risk Management on them. Risk Management Main Page

Now you shouldn’t tell anyone that you are starting the Project Risk Management process. That will make them think you’re going to waste time doing fancy mathematics, having all kinds of useless meetings and generating worthless paperwork. But you’re not going to do that fancy, expensive stuff. You’re just going to do simple risk management so you can solve some problems early in the project. In fact, risk management lets you solve some problems before they start.

This early problem solving begins during the planning phase. Let’s say your project is to reorganize the department’s supply room. First you identify the problems (risks) that may affect the project. Then you think about how likely each of those problems is to occur and what the damage will be if they do. The ones that are likely to seriously affect the project are the ones you should do something about. Next, you analyze the identified problems and think about how you might avoid each one. In other words, you think about how you might dodge them completely.

Project Risk Management – Early Problem Solving 

For example, when you think about the problems your supply room project will face, you come up with two of them that are likely to occur and will have a big impact if they do. The first problem is that people may not keep the supply room well-organized after you finish the cleanup. The second problem is that it will take people longer to find what they want than it does now because the supplies will probably be in different places. Let’s tackle each of these problems (risks) separately.

The first risk comes down to making sure that the new organization of supplies is maintained. You and your two project team members discuss possible incentives for the people who stock the supply room shelves. You believe you can avoid this problem if you involve the staff in the design of the supply room and hold them accountable for maintaining it. The three of you agree on that task and you add it to the project plan.

You go on to the second risk of people not being able to find the supplies they want because the supplies have been moved to different locations. You certainly don’t want complaints about your reorganization. So you discuss what would make it easy for people to find things. You finally agree to place the high-volume supplies, the ones that are needed most often, near the entrance to the supply room. After you’ve included the supplies that cause two-thirds of the trips to the supply room, you agree to organize the remaining items by category (paper products, writing instruments, clips and staples, etc.).

project risk managementThe amount of risk management you do depends on the size of your project. On a very small project, the risk management effort might be completed over a lunch with the project manager, the sponsor and some team members. Here’s what that discussion will do:

  1. Identify the risks the project faces
  2. Assess the likelihood of the risk occurring and the size (magnitude) of its impact on cost and duration if it occurs
  3. Develop risk responses to avoid or reduce the impact of the risk.

Project Risk Management Steps

Here are the steps you can follow for your project risk management process. You may do some or all of them, depending on the size and complexity of your project.

  1. You and the team members begin by reviewing the list of identified risks, both positive and negative. That list is called the risk register. Then each person assigns a rating of high, medium or low to the likelihood (probability) of each risk occurring and the size (magnitude) of the impact if it does.
  2. You gather and correlate the individual assessments of probability and magnitude and calculates the average for each risk in the risk register.
  3. You and the team members review the average ratings and select those risks that are important enough to justify a response. This is called qualitative risk analysis.
  4. You present the qualitative risk analysis to the project sponsor. The goal is to obtain their approval to plan responses to the risks.
  5. You and the team members develop risk responses for the positive and negative risks. For positive risks, you design the response to increase the probability and/or the magnitude of the beneficial impact. For negative risks, the response should decrease the probability or magnitude of the adverse impact.              Risk Responses
  6. You present the recommended risk responses along with an analysis of their impact on the project’s cost, schedule and budget. For the risk responses that the sponsor approves, the project manager makes changes to the project plan, schedule and budget to reflect those risk responses.

Summary of Project Risk Management

Even on small projects, risk management helps you identify and solve problems before you begin work. This increases your project success rate, which helps you advance your career.

You can learn more about managing risks in our online project management courses. You work privately and individually with a expert project manager. You control the schedule and pace and have as many phone calls and live video conferences as you wish. Take a look at the course in your specialty.

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