Effective Risk Management in Project Planning
Projects are increasingly becoming more dynamic as business firms require the capability to manage the risks or uncertainties which come with these changes. There is a growing need for skilled professionals in project management, which will enhance job opportunities in the industry in the coming years. Risk management in project management refers to the practice of recognising, analysing and managing risks which can affect the generated results. Project managers mainly took the responsibility of supervising and monitoring the risk management process during the project’s overall period. They must acquire a clear knowledge and understanding of the common goals and objectives to recognise any existing barriers that will affect the team’s ability to generate results, which will help them effectively manage the risk
Generally, risk management is mainly about focusing on the project’s objectives and determining the actual threats associated with the organisation’s objectives and what can be done to address those threats from the initial period. Various scenarios or events fall under different risk categories, which are broad and misinterpreted several times. There are various types of project risks that project managers might encounter. To understand the different types of project risks, project managers must understand the project types and the factors to be considered. Yet, several risk types occur more often despite the particular projects. These common risk types mainly consist of –
- Cost – There are several risks that occur in events which affect the budget, mainly those which become the reason for the project to be finished over cost. Finding errors in the cost estimation generally creates risk with external factors.
- Performance – The risk in the events becomes the reason for producing inconsistent results in the project along with the project specifications.
- Schedule – There is a risk of scheduling unplanned conflicts like the events, which is why the project is delayed. The common cause for the delay of projects and scheduling issues is scope creep.
Various types of risks occur in project management depending on the type and details of the project. For instance, project managers must make plans regarding the risks pertaining to the training, execution, testing and much more. When the project managers identify the category of risk, then they have to focus on and start understanding the ways by which these risks might affect the outcomes or results generated by the projects, and they also need to emphasise the ways by which these risks can be mitigated. To do this, project managers must consider the depth and breadth of every type of risk in the overall project work.
Importance of Identifying, Analysing and Responding to Project Risks
Project managers have to follow the process of risk management so that they can prevent the project from unplanned risks. This will help them identify, understand, analyse and respond to the opportunities and threats the projects are producing. Before the execution of this risk management process, project managers have to understand the practices adopted by the organisation appropriately and what method will be adopted by the manager to mitigate the risk for that particular project. The steps of planning involve the identification, evaluation and response of project managers towards the project risks.
- Identification refers to the recognition of potential risks which affect the project.
- Assigning ownership refers to the allocation of ownership of every recognised risk from the team members who are responsible for monitoring if there is any opportunity or threat related to the risk. Even though several project managers mainly prefer to allocate the ownership after evaluating and prioritising the risk. Taking early steps leads to beneficial results.
- Analysing refers to the evaluation of each risk to have a better understanding of the driving factors which are involved and show adverse impacts on the project. Moreover, project managers have to consider the depth and breadth of every potential threat during this phase so that they can analyse the severity of every risk with regard to the overall project work.
- Prioritising refers to prioritising the project risks depending on the severity and urgency of the effects caused by the project risks.
- Responding refers to the recognised risks that work in a way that agrees with the risk management approach, either by minimising the effect of the project risk or by taking significant steps to safeguard the project from risks if they occur. This step involves building responses and taking appropriate actions to mitigate the risks.
- Monitoring refers to the observation of the risks and taking significant steps for the implementation of strategies of risk management along with the changes that are required to be made.
- As the risk`s nature is unpredictable, project managers must be disciplined and prompt to easily adapt to the changes required in the overall project work.
Steps To Manage Risks
It is not possible to mitigate the risk completely, yet it is possible to manage the risks. Several steps can help project managers manage the risks by minimising them in projects effectively. These steps are discussed below –
- Creating a plan for risk management – Any individual who acquires expertise in the field of project management knows the importance of a robust plan for the project for the successful completion of the project. Many additional plans are frequently surrounded by the actual plan of the project involving the plan of risk mitigation. The risk management plan must explain the method by which the risk is recognised and prioritised, the tolerance level of risk and how the team members will respond to the risk, how the project manager communicates regarding the risk and so on. Creating these plans for risk management takes the effort and time of the project managers, but investment in the planning is made mainly by establishing a roadmap, which will help in guiding every member of the team in the overall execution process of the project.
- Keeping the register of risk up to date – The register of risk mainly refers to the list of all the possible events of risk which exist with the potentiality of making impacts on the project, and these are either associated with the risk mitigation plan or are listed in a different document. Taking note of all the risks and keeping them will aid in helping the project manager to stay on top of all the possible problems, but it is also critical to update them timely with the latest issues so that they can help in providing accurate snapshots, which can be used further if needed. The risk register can help keep track of what events have happened, how the team members responded to that particular risk, and what new risks have occurred in the execution of the project but have yet to be detected in the initial period of the project. To have a clear picture of the project state, it is important for the project managers and the team members, along with the stakeholders, to keep the risk register updated, and they also have to make sure that it is integral along with the other deliverables of the planning.
- Understanding the risk events – Project managers make common mistakes when managing risk. This common mistake is that they contemplate the risk about the possible results instead of focusing on the event of the risk. For instance, several times, team members or project managers recognise the missing deadline as a risk for their projects; meanwhile, the missing deadline is a threat to the project work, which means that it impacts the project instead of a risk. Despite this, if risk is considered in the manner – Because of X, there is occurrence in Y, and this causes impacts on Z. This will aid the project manager in understanding the causing roots of the risk, the events of risk and the ways by which it can be mitigated.
- Being proactive rather than reactive – Sometimes, project managers make mistakes by adopting a reactive approach instead of a proactive one. It is important for them to be prompt while reacting to the occurrence of unplanned risk events, at the same time, it is also important to monitor and figure out if the steps are right or not and to observe the project from the viewpoint of a proactive lens. Project managers can make themselves by taking preventive measures which reduce the probability of the risk event instead of attempting to respond at once when the risk has already occurred, and this can be done by giving proper time in the initial stage of the risk mitigation procedure and understanding the evaluation of every risk.
- Developing the skills of project management – To manage projects and the associated risks effectively, building a robust foundation for the necessary project management skills is necessary. Additionally, students and employees need to practice and stay updated with the latest industry trends and participate in workshops and conferences. Doing these is the best way by which one can refine their skills, earn certificates and attain success in their life. Individuals or students who have the opportunity to supervise any project and need more formal and proper training must develop their project management skills. Those already in the industry can work on themselves by sharpening and practising their skills. They can develop the necessary skills by practising hands-on experience. The faculty of the industrial sector brings exceptional opportunities for them, which can be discussed in the real world to help the students enhance their capability of applying their knowledge and understanding to particular scenarios they will face while serving their roles.
In conclusion, projects are an important part of organisations which need the capability to manage uncertainties and risks. And, it is important for business firms to work on risk management strategies as it recognises, analyse and respond to the potential risk. After identifying the potential risk in the project management, it is analysed to understand how much it has impacted the project and the business. After analysis, a significant response is considered, which explains how the risk has affected the project and what strategies can be adopted to mitigate or reduce it and impact the project less. There are several steps which can be used to manage the risks. These are creating a plan for managing the risk, keeping the register updated and staying updated with the latest trends, acquiring knowledge and understanding of the risk events, and adopting a proactive approach instead of a reactive approach. This helps them to take preventive measures actively. Lastly, it is important for them to develop their skills in project management. This will hone their capability and make them successful.
- Datta, S. and Mukherjee, S.K., 2001. Developing a risk management matrix for effective project planning—an empirical study. Project Management Journal, 32(2), pp.45-57.
- Hopkin, P., 2018. Fundamentals of risk management: understanding, evaluating and implementing effective risk management. Kogan Page Publishers.
- Raz, T. and Michael, E., 2001. Use and benefits of tools for project risk management. International journal of project management, 19(1), pp.9-17.
Author Bio: Mark Edmonds, an old pro at Academic Assignments, spends significant time in giving first rate project assignment help to students. With long periods of ability, Mark is committed to guaranteeing students ace the complexities of project planning and risk management, engaging them for academic excellence. His clever strategies and guidance altogether affect incalculable projects, empowering students to succeed in their academic undertakings and develop essential skills for their future careers.