Project Management Professional (PMP)® Articles - The Perils of Risk Management: Six Strategies to Best Plan for Risks

The Perils of Risk Management: Six Strategies to Best Plan for Risks

For most, taking risks is uncomfortable. The uncertainty of not having a good idea about the outcome is a challenge to get over. According to Merriam-Webster, "risk" is "something or someone that creates or suggests a hazard," or "the chance that an investment will lose value." The definition seems to describe "risk" as a purely negative event.

The fear associated with "risk" likely comes from the traditional "fear of the unknown." Nevertheless, managing risk is a crucial part of any leadership position, including project managers. In addition to management and planning, one of a project manager's significant goals should be to ask and prepare for "what could go wrong?"

It's unsettling and a scary idea to think about. However, this mindset can help project managers navigate all the things that can happen before, during, and after a project. Risk management is crucial to project management experience. If you are a project manager trying to better plan for risk, take a look at these tips to prepare.

Involve Your Project Team—And Vendors

On, Devin Deen, Scrum expert, and video trainer, discussed the importance of getting your entire team involved in the risk management process. He advised that project managers reach out to project team members to get their take on potential risks.

Project team members likely have experiences with projects that are different from yours, which means they can identify situations and opportunities for risk that you could encounter. Deen even mentioned how important it is to involve people you might not traditionally ask but are still a part of the project management process, including vendors and client representatives. These people likely have a long list of things that went wrong during the last project, and they can speak to this aspect to give you a clear view of what to expect.

Look at Past Mistakes

No one likes to look at a highlight reel of their failures. Nevertheless, a habit of looking back and learning from past issues can serve you well. When did you go over the budget? What caused you not to meet a deadline? Was there a lack of communication between yourself and a client? When it comes to managing risk, some of the best things you can do is create a list of past errors and retrace your steps. You won't always catch everything, and there are times where things will go wrong even when you prepare for it. However, you put yourself in the best position to manage risk when you become committed to keeping track of what didn't work so you can better plan to deal with these issues.

Build a Risk Database

This step is a way to allow your team to capitalize on the idea in the first step. While it helps to get the conversation started, and you want to begin a habit of looking back to understand past mistakes, you need a way to track these issues. One great way to do this is to build a risk database. As you and your team are working through a project, you want to create a way that they can actually record mistakes and risks that they come across.

This can be as simple as building a spreadsheet where you allow your team members to record the risk or mistake, add a brief description, include a date, and include information like the owner and action steps. You can even create categories for the risk, so you can quickly sort to find the most relevant risk occurrences when you need them. This database is a comprehensive record of risks that occurred that you can track. Additionally, it allows you to keep track of how you are monitoring risk and improving your strategies for addressing it.

Create a Knowledge Base for Recurring Risk Management Issues

So, you've gone back to the drawing board and have identified times where things didn't go to plan. Excellent! Now, what do you do with this information? A great way to capitalize on this information is to develop a "risk knowledge base." You can develop a library of information that you and your team can refer to as you move through projects.

These documents can be an internal knowledge base that addresses solutions for standard or recurring risk management problems. For example, what do you do if company sales start to lag? What is the protocol if you have a team member that had to leave their position? It's important to have a project risk management handbook so you can determine the best tactic to address administrative and common recurring risk management issues.

Don't Forget About Positive Risk

Risk doesn't always have to be negative. Some events and occurrences could happen that can benefit your project. Understanding the possibility of positive risk can help you improve your budgets, decrease the amount of time it takes to finish your project and create a better collaboration environment. A few examples of positive risks for your project management team could be a new policy that benefits your project management efforts, the approval of using new project management or organizational tools, and the possibility of a bigger budget.

Failing to plan for positive risk can keep you from taking advantage of opportunities that come your way. So, just like you would for negative risk, go back and see where these situations happened so that you can plan for them. Additionally, make time to research things like upcoming policies, new technologies, and any events that could be going on in other departments that could positively impact your project. The more you know, the better options you have to plan to capitalize on positive risk.

Develop a Risk Management Strategy for your Specific Projects

Again, you can't plan for everything, but you can use past occurrences for future strategies. What you want to do is determine the risks that are likely to happen, prioritize those with a higher likelihood, ask why and how they could happen, and then build a response based on past actions that did or didn't work.

This step is where that risk database is going to come in handy. You want to create a dynamic risk management strategy and plan that allows you to be flexible and agile in managing various risk-based occurrences for your specific projects. It should detail opportunities for risk, how likely they are to happen, and a step-by-step approach to how you will handle each situation. You should go over this document with your team as you brief them for the upcoming project, and it should be available for reference.

Risks Don't Have to Derail Your Project

If you are not using a risk management strategy, you are not alone. According to PMI, only 27 percent of project managers surveyed always use risk management practices. However, it’s crucial that the development of risk management strategies in the project management space becomes standard practice. Understanding risk can reveal opportunities to see where you and your team can improve. It can notify you of crucial issues so that you can better prepare while decreasing costs and timelines. Again, while it is important to identify negative risks, you also want to prepare to handle situations that can positively impact your project, which is also known as a positive risk. If you make a point to involve your team while also committing to collecting data, you can build a comprehensive plan for mitigating adverse risks and taking advantage of positive ones.


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