framework to manage risk management

A 4 Step Risk Management Process in Project Management

A 4 Step Risk Management Process in Project Management

Having a process in place to manage your projects is highly recommended as it gives project managers a set structure to work from.

However, no matter how tight this process is, there is always the threat of something coming out of the woodwork and putting a halt to the project. Therefore, it is highly advisable to include a risk management process in your project management plan.
We have noticed that having a project management process that includes risk management, it increases the chance of projects and programs being completed and implemented successfully. A well-planned process needs to be flexible enough to handle the unexpected and ensure that a project is delivered on time and within budget.

An organization that fails to include risk management into its project management process faces a possible threat to the success of the overall project. Risk management should be discussed at the beginning when the project manager is drawing up the plan. Within that plan, an assessment of any potential risks should be carried out across all aspects of your project.

To identify and manage risks within a project correctly, these following steps should be kept in mind:

Four Steps of the Risk Management Process in Project Management

  • Identify the risk/s that may occur
  • Understanding the risk – not all risks are negative, some risks may be positive and provide the organization with opportunities
  • Develop the best response to a risk
  • Strict monitoring and control must be in place

1. Risk Identification

Sitting the project team down to discuss potential issues (minor or major) would be the most productive way of identifying possible risks. The more heads involved in this the better, as the project manager may not be able to classify all risks that a project is being faced with.

2. Quantify the Risk

When identifying the risk, most organizations are advised to plot the risk on a risk matrix. The risk matrix consists of a scale calculating the probability of a risk occurring and the impact that the risk would have if it was to happen. By comparing the probability and the impact together the organization can from there make decisions surrounding the plans for that risk.

3. What Do You Do Once You’ve Quantified the Risk

Now that the organization has identified and quantified the risk, they need to decide if action needs to be undertaken. Such action may include:

Sitting back and doing nothing – Accepting that the risk is there but not assigning any time to rectifying of it. This is not advisable as it may have severe implications on the organization’s projects.
Plan of action – Put a step-by-step procedure in place to deal with each risk if they were to arise.
Hand over the responsibility – Nominate an individual or team to deal with the risk and to come up with possible solutions.

4. Strict Control and Monitoring

Having carried out these 3 steps it’s important to have full control of the risk and monitor it precisely to avoid any knock-on effects from it. Risk management should not be discussed with apprehension within an organization when it involves projects.

Once completed and managed successfully it will ensure that all risks are understood, agreed and controlled by the project team allowing minimal effects to the implementation of the projects. Check out our guide to establishing a framework to manage risk