How to Effectively Manage Project Risk?
Estimated reading time: 4 minutes
Project Risk Management
Project risk analysis and management is the process designed to identify and remove any risks that inhibits progress towards the project goals. It is frequent for things to go wrong in a project, usually due to reasons that are specific to the particular industry or working environment. These often result in extra costs and resources wasted. Examples of things that could go wrong include failure to keep within a budget or missing a deadline. To account for these situations that arose due to expected risks, project risk management has to be implemented to prevent future occurrences.
First and foremost, it is important to acknowledge that risk exists as a consequence of uncertainty. To reduce uncertainty, identification of the risks and analysing the risks are necessary. After identifying those risks, here are some steps that can be done to reduce these uncertainties to achieve effective project risk management:
- Brainstorm for preventive measures to put a stop to the occurrences of the risks
- Brainstorm for preventive measures to reduce the impact should the risks occur again
- Brainstorm for contingency plans to deal with the risks should they occur again
With regards to the techniques for effective project risk management, there are several ones:
- Qualitative Risks Analysis: This is considered the most important element of the process as it covers the identification of the risks, which can be done by interviewing key members of the project team or reviewing past corporate experience.
- Quantitative Risk Analysis: This analysis allows the risks to be evaluated against the cost, time and performance of the project, which are essentially the criteria for project success. Techniques that are often used here will be the sensitivity analysis and the probabilistic analysis.
One major assumption that many people have is that the project manager is the one who is solely in charge of project risk management. However, that is totally not true. The role of a project manager is to promote and direct risk management for the project. It is to be noted that a one-person discussion of risk is never as effective as team discussions. Discussing risk as a team allows input from different perspectives, increasing the likelihood of a risk being accessed properly.
Other than the project manager, other personnel who should be involved in the project risk management will be the executive regional manager, initial risk owners, project risk team members, designer, contractor and the risk management support group. Given that there are so many stakeholders at hand, good communication is crucial for effective project risk management. It ensures that everybody know their own roles. Good communication also helps everyone to be well-informed of what’s going on in a project, inclusive of understanding the risks and trade-offs made in a project.
To summarise, the benchmark for an effective project risk management will be the identification of risks, good use of execution techniques to manage risks as well as strategic involvement of the whole project risk team when managing risk.
To provide more information on how to effectively manage project risks, the Project Manager and Designer has jointly developed a guideline to help people cope with threats and opportunities throughout the entire project life cycle. This guideline aims to aid people in identifying, quantifying, preparing a response to, monitoring and controlling project risks. It provides information in the following areas that will help with risk management efforts: a consistent methodology for performing project risk management activities, techniques and tools for project risk management, identification of data requirements for risk analysis input and output, information on how risk management fits into the Capital Project Delivery (CPD) process and guidance on how to proactively respond to risk.
