How to Ensure Success With Project Risk Management

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Run-through

She is an expert content marketing manager who works at YouTeam – a marketplace for instant engineering team extension. She passionately discovers and writes about technology, innovations, and software development solutions.

Handling projects as a business owner or project manager is a tough job. Every project comes with a fresh set of challenges and risks that can impact its outcome. Instead of handling the challenges after they appear, it’s more effective to take a proactive approach and prepare in advance. And that is what project risk management is used for.

But what exactly is the purpose and benefit of risk management? Is it essential for your business or project? More importantly, how can it be implemented for your project? Read on to know the answers to these questions and get a clear picture of project risk analysis, importance, and implementation.

What Is Project Risk Management? Why Is It Important?

Project Risk Management is the practice of identifying, analyzing, and mitigating the risks associated with a project. This general definition makes it sound simple, but it’s not that easy to practice as project risks are very difficult to predict. Due to this method, you analyze your future project, predict the possible risks that can happen and have a negative impact, and create a viable solution to avoid or adjust to it. Here are some common types of challenges in project management that you will encounter whether you are working with a remote software development team or an in-house team:
  • Increase in project costs
  • A key member suddenly leaving the project
  • Failing to meet deadlines
  • Changes in the scope of the project
  • Disagreement with stakeholders
  • Problem adapting to newly installed technologies
  • Unable to acquire proper talent for the project
  • Shortage of workforce or resources
  • Third parties and vendors fail to deliver essential materials for the project on time.
For every project, you’ll encounter a different set of obstacles and challenges, so the solutions and preventive measures will differ each time. But project risk plan lays down some fundamental guidelines or series of steps that you can follow to identify and minimize all kinds of risks. So how important is it for businesses? Well, here are some reasons why you need risk management:

Prevention Is Better Than Cure

The main idea behind risk management is to prepare for bad things in advance. You can take proper measures to eliminate the possibility of risks or have an action plan to counter the challenges when they arise. Either way, you’ll be focused on finding solutions before the problem has even started, and it significantly improves the success rate of the project.

Helps To Meet Deadlines

If your approach towards project risks is to handle them as they come, you’re going to lose a lot of time. But identifying risks and thinking of possible solutions in advance will save valuable time later. You’ll be able to take quick and effective action to get the project back on the right track without wasting much time. With proper risk management, your projects will never miss out on deadlines.

Improve Business Reputation

Risk management practices also boost your reputation. By adequately implementing risk management, you will complete projects more smoothly, with better results and minimal setbacks. Client, stakeholders, and other parties that work with you on the project will be impressed with your ability to handle projects.

Cost Reduction

There are many ways in which risk management can cut down costs and prevent unanticipated expenses. If you can eliminate a possible risk right from the start, you’re already saving money. However, not all risks can be avoided entirely, and you’re likely to encounter other problems later. But when you’re preparing for such scenarios beforehand, you’ll have more time and a better mindset to develop cost-efficient solutions.
The past few years have seen a paradigm shift in businesses as organizations rapidly accept and implement risk management practices. IMPA’s survey on project management shows that 60% of the organizations surveyed practice project risk management actively.
These are promising numbers, but there are still plenty of businesses and project managers that haven’t tried it yet. If you’re among them, it’s the right time to perform risk management for all your future projects, and we’ll show you exactly how you can get started.

The Risk Management Process

As it was mentioned earlier, risk management follows a guideline that can apply to any type of risks in project management. There are five critical steps in the process.

The Risk Management Process

Risk Identification

The first step is to identify all possible risks that can arise anytime throughout the project duration. A great way to identify risks is by having a brainstorming session with the project team and some experienced project managers and specialists. Inputs from all the members can highlight a lot of potential risks and their solution too.
It’s also best to start this step early to have more time for multiple sessions and meetings. More time will yield more ideas, and make sure that you’ve considered all scenarios.

Risk Analysis

Once you have a checklist of possible risks, you have to analyze them. We’ll list some crucial factors that must be considered:

  • Elimination vs. mitigation. You must decide which is the best and feasible solution for a particular risk – to eliminate it if possible or mitigate its effects as much as you can.
  • You’ll need to estimate the costs and expenses associated with the process of handling and minimizing each challenge
  • You must think of solutions that are most efficient and can prevent risks without seriously affecting the workflow.

Risk Assessment

This is the step where you rank and prioritize the risks. Things that can hurt the project most and cause serious problems must be dealt with first. By sorting the potential risks based on their impact on the project, you’ll be taking urgent action on the most crucial obstacles and then slowly take a breather before addressing other minor risks.
Another role of risk assessment is to determine the right time to act. For example, if there’s a chance that a particular project member might leave early on, you should start looking for a replacement? Many similar cases can arise where you have to consider the timing of your action plan carefully. Make sure you think about this when assessing risks.

Risk Treatment

At this stage, you have to implement solutions and preventive measures to avoid challenges. The first step of risk treatment is to decentralize the process by allocating tasks to the right departments. After all, problems arising in certain departments of a project can be best handled by experts in the same department.
A proper communication channel is a must in this stage, as risk management requires everyone to stay in the loop. You never know when you may need to contact stakeholders, clients, or other departments. Some solutions need people from different areas of expertise to work together. For all these reasons, there should be proper channels to quickly communicate with everyone involved in the project.

Risk Monitoring

Even after you have implemented the necessary steps to minimize or eliminate the risks, you can’t stop monitoring the situation. Not all projects are predefined, and many projects change their scope as things move forward. So you never know when you come across new obstacles.
Risk management is not a one-time process. Throughout the project and right until the end, you must identify possible risks and develop solutions. As the project moves from one stage to another, different sets of risks can also arise, so continuous monitoring is the essential part of risk management.

Summary

Project risks can cause a lot of problems – low quality, increased costs, failure to meet deadlines, and in worst cases, complete failure of the project. By implementing project risk management, you can anticipate such risks before getting out of hand and being ready with a contingency plan.

Just remember the five steps of risk management – identify, analyze, assess, treat, and monitor. Whether you’re a small startup or a large organization, risk management is crucial for your business and all your projects’ success.

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