Risk Management

by Doug Berube

 All projects are at risk, which requires project managers to indentify and mitigate project ricks to ensure project success.

“The problem with the future is that more things might happen than will happen” (Plato)

Risk management is the best preventive program to ensure success. Risk management is at the heart of project planning and is a continual process until the project is complete. The implementation of a risk management plan is a positive influence on creative thinking and innovation.

The first phase of risk management implementation is the preparation for risk analysis. This planning cycle is a tool to create risk awareness and the preparation enables the understanding of project risks which empowers the project team in aiding the decision makers regarding project development. Project development monitoring and risk exposure is prepared by using checklists, project history comparison, and even interviewing the stakeholders.

Risk identification and analysis should be accomplished during the same series of conceptual meetings. The first step is to identify all the processes of the project and then rate the risk factors according to the impact to costs, deliverables, and completion. Now that the risk factors are known, they have to be quantified. All the risks must be estimated for the risk impact on the project. These estimations must have a value that can be applied to the understanding of the project objectives. This newly acquired risk information can be used to draft a contingency plan that needs to be signed off by all stakeholders.

The risk response is the implementation of the contingency plan. The project manager and project team are the most qualified to identify which strategy is best for each risk because they understand the consequences of those strategies and how to react to the responses of the plan. The strategy is to reduce uncertainty by obtaining more information which will help re-evaluate the likelihood or impact of the risk. The response is to eliminate or avoid the risk altogether by taking actions that will minimize the effect. Another option would be to going outside the project by contracting out the affected work. The worst case scenario would be to replace the failed stakeholder.

Risk monitoring and control keeps track of the contingency plan tasks and identifies any new risks. Monitoring evaluates the execution of planned strategies and the identified risks and the plans effectiveness. A risk register should be used to view the effectiveness of the strategies and regularly review in the risk management meetings. The risk control involves choosing evaluated response strategies, implementing the contingency plan, taking corrective actions, and re-planning the project, if applicable. This part of risk management is to take the corrective action and maintain the risk management plan.

This next step is often not considered as part of the risk management plan, the project closure. The close out plan is critical to the reviewing the success of the project, completing the financial responsibilities, and report the feedback to evaluate the preparation for the risk management. This is the time to consider the results of investment against original objectives and compare the anticipated risk impacts.

Risk management establishes a clear understanding of the project objectives, all alternatives, and all issues that need to be considered during the design and construction phases. Effective risk management is an integral and required part of the project management, the team can not only predict possible future outcomes, the team can take action to shift the odds for project success. The big picture of risk management is to help senior management to understand what is happening with the project and the challenges the project had to overcome.

References:

Carbone, Thomas A., and Tippett, Donald D., “Project Risk Management Using the Project FMEA” (December 2004) pp. 29-32

AbouRizk, S., PhD, PEng, “Risk and Uncertainty in Construction.”

Mindtools, “Risk Analysis and Contingency Planning.” www.mindtools.com