These days, we see that the projects are becoming dynamic. Hence, it is important for the organizations to have the ability to manage the risk or uncertainty that occurs. This has led to the implementation of risk management in Project Management. There is a high demand for skilled professionals in project management. In this blog, you will learn about risk management, its need, how to manage risk and the steps required for the risk management process. Through the project management training, you will master all the concepts from basic to advanced level, nurturing you to be capable enough to clear the project management certification exam. Let’s get started!
Risk management is the methodology or a practice of determining, evaluating and mitigating or preventing the risks of a project which may impact the expected outcomes. The project managers are responsible for looking into the process of risk management and should ensure to deliver the project within the given deadlines.
It is important for the project managers to have a clear understanding on the objectives of risk management to ensure to prevent the risk. They should be capable of identifying the barrier which could show an impact on the team’s ability to deliver the results.
It is not so easy to identify the risks that might come up and they cannot be interpreted. Sometimes, it can also be misinterpreted.
Risk management plays a key role in the project management as there would be a hidden risk in each and every project. Determining the risk involved in the project is required to deliver successful outcomes. The risk management plan is one of the aspects that helps in addressing the process that is behind the risk management. The project team will be capable of identifying the risk, prioritize, categorize and mitigate the risk prior to the delivery of the project. Necessary precautions will be taken to get rid of the risk in the project. The risk assessment meeting helps in doing all these activities.
Risk assessment helps in identifying the value of risk that can be created during a situation and also the threats that might come up. This also helps in measuring the probability of risk which could become real. Every project has a project manager and it is the responsibility of the project manager to perform risk management. Irrespective of the impact, identifying and preventing the risk is important to deliver positive and expected results.
In simpler terms, below listed are the different ways which help in running the projects efficiently leading to organizational success. Risk management helps in:
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Whenever you start working on a project, you need to have an idea on what might go wrong. It could sound negative but only then the issues can be anticipated. Only then, you can also think of the mitigation process and strategies that help in managing the risks.
Risk management in project management is a practice which includes identifying, analyzing and responding to the risks that come up during the project life cycle. This will help in eliminating project interruptions and helps us to achieve the goal as expected.
Risk management has to be included in the planning phase of the project life cycle to have an understanding and determine the risks that might occur so that necessary measures can be taken to avoid the risk in the project.
A risk is generally anything which could impact the timeline, budget or performance of the project. In larger projects, risk management will be included in the planning phase and required mitigation strategies will be used. Risk management for smaller projects will be simple, low, medium, high priority based risks.
Now that you have understood about risk management, you also need to know how to manage a risk. It is definitely an important aspect to look into in project management.
The primary step is to make a precise definition of the project to deliver. In simple words, a project charter with all the required information like scope, objectives, vision, deliverables of the project have to be documented and prepared. In each and every stage of the project, it is possible to identify the risks. The complete team has to engage and identify the risks that might occur.
In some scenarios, the project managers will directly reach out to their team via email with the description of the project and details, also asking them to identify the areas in which the project might go wrong and the risks that might occur along with its impact levels.
For efficient plotting of the risks, it is a good practice to have all the team members, project manager, vendors and the clients, stakeholders in a conference meeting room and identify the risks together with discussions.
For each and every risk which is defined, it has to be tracked or logged somewhere. For this purpose, the risk tracking template is used for analyzing the priority level of the risks included.
The next step is to create a risk management plan that helps in capturing all the negative and positive impacts of the project. It also includes the actions that can be taken to deal with them without any issues. It is also important to schedule meetings regularly during the project development and monitor the risks involved in the project.
Below listed are the 5 main steps in the risk management process. They are:
Let us get an in-depth understanding on the different phases in risk management.
This is the first step in the risk management process which involves identifying the risk type that the organization is dealing with or may face in the future.
There are different types of risks included. They are:
Identification of the type of the risk that the organization might face is important and all these risks have to be manually jotted down. If there is already a risk management platform already implemented, then the risk identification phase will go smoother and easier. All the information and identifications will be included in the system.
Accessing this data is an easier task as all the data will be stored in the risk management platform. There is no need to request permissions for the project manager and the team members to view the risk data available in the risk management system.
The next step is to analyze all the risks that have been identified in the previous phase. Risk analysis is basically answers to these set of questions like:
The teams will also be capable of determining the probability of the risks that occur. There are some factors which organizations will consider when the risks are prioritized, they are listed below.
With risk analysis, the organizations will be handling and responding (taking actions) based on the severity of the risks. This analysis will give us a better understanding of the risks and also the impact and aspects that affect the business. The organizational risk will be more if there are more business aspects affecting the organization.
There are some organizations which make use of the manual risk management processes and perform manual risk analysis. While some of them deploy a risk management solution, some do it manually. If it is the deployment of the solution, then the solution will be capable of analyzing the policies, documents, processes, procedures for mapping a risk and creating a framework for risk evaluation purposes.
After risk analysis, there is a need to rank the risks and prioritize them. If the organization is using the risk management solution, then the solution will take care of ranking and prioritize the risks based on severity, this is completely inbuilt in the solution.
Low risks do not require the intervention of the higher level of management while high risks will be a risk to the organization and affect the ratings too. High risks require immediate attention and resolution to prevent the cause.
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After risk analysis and prioritization, the action has to be taken. The risks involved in the projects have to be contained or eliminated. If it is manual risk management, it is important to discuss the issues with the stakeholders.
Through the risk management solution, there will be a notification sent to the stakeholders through the application itself. With this, all the key decisions will be made.
This is the final step of the risk management process. The risk will be monitored to ensure that it does not show any more impact on the organization.
Successful project implementation is the primary goal of every organization to maintain a positive experience. Risk management is an important aspect in project management which plays an essential role. Project management training and certification helps in gaining expertise in the concepts related to project management for a better and prosperous career.
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