Proactive Risk Management: Identify, Plan, and Handle Risks Effectively

Reading Time: 4 mins
Elizabeth Harrin

Author and Mentor

Время на прочтение: 4 минут(ы)

Trainer and mentor Elizabeth Harrin is the author of ‘Managing Multiple Projects’ along with several other popular project management books. She runs the Project Management Rebels community and speaks at conferences internationally and virtually. She works as a project manager in the UK healthcare sector.

 

If you’ve been working on projects for a while, you understand the need to manage risks on a project. However, if you’re new to project management, you’ll quickly discover that risks affect every project! Being prepared helps everyone keep the project on track.

Risk management is identifying, assessing, and managing risks (and opportunities, but that’s for another day). You must plan for things that might disrupt your project and manage the impact of those risks, should they occur.

Real-life risk examples

Here are some examples of risks that have occurred on my projects over the years:

  • Risk to project timelines due to protected wildlife nesting on the project site
  • Risk to project timelines due to staff being sick
  • Risk to project quality, timelines, and budget due to loss of data
  • Risk to project budget due to cost of building materials increasing.

A few years back, I did not have a ‘global pandemic’ on my risk management plan. Still, that experience taught us a valuable lesson about proactively identifying risks.

Unmanaged risks can lead to delays, cost overruns, poor quality, or your project’s cancellation.

What is proactive risk management?

Proactive risk management entails being ahead of the game. Make risk management part of how you run the project, not something you do once at the beginning of a workshop and then forget about for the rest of the project.

Here’s how to do it.

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Step 1: Identify risks early

You can’t manage what you don’t understand, so the first step is to make sure you identify risks. You’re bound to miss some, and that’s fine – get as many risks out in the open as possible.

I find it helps to think of risks in categories. When you’re working with the team to identify potential problems, scaffold the conversation by grouping risks like this:

  • Internal risks: Resource limitations, team dynamics, communication breakdowns, scope creep
  • External risks: Market changes, regulatory shifts, environmental factors, competition
  • Technical risks: Data loss, data integrity, cyber security, integrations, new tools that haven’t been tested in your environment before
  • Operational risks: Process failure, supply chain issues, quality control, failure to meet regulatory or compliance standards
  • Financial risks: Funding issues, currency fluctuation, estimation errors

You could consider many other categories, like people risk, reputational damage, legal and contractual issues, scheduling problems, etc. Identify the categories or topics that would help your team the most when thinking about what could go wrong.

Brainstorm a list of risks and allocate owners to each one.

Step 2: Assess and prioritize

Not all risks are equal. Some will present more challenging problems than others, and for project risk management to be effective, it helps to know which ones you should focus on.

We assess risks by looking at probability and impact. Probability is the chance that the risk happens. Impact is how much trouble it will cause if it does happen.

Risks that are low probability and low impact can be put aside for a moment, but the whole point of proactive risk assessment is that you keep coming back to check on them. Organizations use a numeric scale to assess risks and calculate a score, which also helps prioritize. However, risks can change or evolve, becoming more likely to happen as time passes, or their impact might change.

We can also assess proximity: if the risk happens, how far out in the future is the impact going to land? Risks with proximity should be at the top of your list to manage, as they could happen very soon.

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Step 3: Define proactive risk management strategies

Now that you know what risks you’ve got (right now – you’ll add to the list as the project progresses) and what impact they are likely to have should they occur, it’s time to do something about them.

The most common approaches to address risk are:

  • Avoidance: Change your plans so there is no way the risk can happen. This is often difficult in real life as you might be required to use a specific vendor or deliver a certain item.
  • Reduction: Reduce the likelihood or impact of a risk by proactively doing something, for example, allocating more resources so you aren’t miss a milestone.
  • Transference: This is a strategy if you have contractual obligations and can push risk onto a vendor. You could also buy insurance. This is the strategy I think is the least used day-to-day by project managers.
  • Acceptance: Do nothing and worry about it if it happens.

At the end of this step, you’ll have your risk management plan: the actions you will take to implement proactive risk management strategies.

Step 4: Managing risks throughout the project

If you want to be genuinely proactive, the risk management activities described above cannot be a ‘one-and-done’ action. You must schedule time each month to review the risk log and identify if things have changed. You will likely identify new risks as the project progresses, and you’ll want to keep older risks up to date until they can be disregarded.

Check in with key stakeholders so that they know about critical risks, too. Include risk information in your project reports and steering group packs. Ensure your proactive risk mitigation actions are working – or at least being done!

For example, if data risk management concerns your project, you’ll want to ensure the right people know the potential problems and are actively working on resolving them. In my experience, people tend to prioritize working on issues that have happened rather than on proactive risk assessment and management for things that haven’t yet happened. So, you’ll need to ensure the focus remains in the right place.

Taking the next steps

Risk management planning is part of being a good project manager. We’re trying to make projects happen as smoothly as possible, and looking ahead to see where things could go wrong is part of the job!

By identifying risks early, assessing their impact, developing management strategies, and monitoring them throughout the project, you can prevent small things from escalating and show your senior leaders that you have the project under control. So, it’s time to book a risk workshop.

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