01 Oct 2020

An Overview of the Risk Management Process

Risk Management
An Overview of the Risk Management Process

Having a clear risk management process to follow is a vital part of project management. It will help you identify any potential issues before they occur and ensure you’re monitoring those risks during the project lifecycle.

Potentially, implementing good risk management could see you mitigate those risks altogether or prevent small risks from developing into larger ones.

Download our free risk management plan templates
 

THE RISK MANAGEMENT PROCESS

The risk management process is a plan, which outlines the actions and appropriate responses that will be taken in regards to potential risks. 
 

Step 1: Define the risks

Before your project commences, the first step is conducting a risk management assessment and identifying what the potential risks are. Here are some things to consider when defining risks:

  • Event: What could happen?

  • Probability: How likely is it to happen?

  • Impact: How bad will it be if it happens?

  • Mitigation: How can you reduce the probability (and by how much)?

  • Contingency: How can you reduce the impact (and by how much)? 


Step 2: List all risks and assign a probability 

Each risk will have different impacts if they were to occur and some less so than others. After you have defined what the potential risks are, consider what each of the different risks impact would be on the project - high, medium or low. If you need to use numbers, you can arrange a probability scale: 0.01 to 0.33 = Low, 0.34 to 0.66 = Medium, 0.67 to 1.00 = High.

Remember there is no universal formula, as it will vary by the project and organisation. So it pays to be flexible!

 

Step 3: Brainstorm with stakeholders and your team

During the risk management process, it is important to receive input from others. If this is an unfamiliar type of project for your organisation, it also might be beneficial to set up interviews with industry experts, more experienced project managers, or long term employees.
 
What to ask:

  • What could happen?

  • How can it be prevented?

  • What to do if it does happen? 

​When brainstorming with others, it’s important to keep an open mind, as you never know when an out-of-the-box idea could be the solution you need for resolving a potential risk.
 

Step 4: Examine risk consequences

From your brainstorming session, you should have information on the possibilities and outcomes associated with each risk. Each risk should have specific consequences listed - be as specific as possible.
 
Over budget is general and does not accurately portray the risk. However a late delivery of cement to your construction site resulting in a budget blow out of 13% is much more useful.

 

Step 5: Develop mitigation strategies

It's common practice to develop mitigation strategies for high or medium risk elements, which will help reduce their impact or eliminate them altogether. Address critical risks first, which you identified as having a high impact on the project and assign roles and responsibilities for each risk.
 

Step 6: Monitor and update your risk management plan

The process of risk management doesn’t stop after you’ve initially created a thorough risk management plan, as it should continue throughout the project lifecycle.
 
Continually monitor risks and update stakeholders by creating a reporting system for risks. Keep in mind, risks can change over time and one that you had initially assigned as low could turn into a high risk at a later stage.

 

Step 7: Analyse the effectiveness of your risk management strategy

Lastly don’t forget to take learnings away from the project and how you can implement them into your next project.
 
By following a risk management plan, you will help define uncertainty surrounding your project and create a system to reduce negative risk.


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