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by Julie Bennett on August 5, 2024
Coming up with a plan to deal with potential risks is part and parcel for market traders, army generals, and of course, project managers.
While you can’t predict the future, a risk management plan makes it possible to succeed in the event that risks actually come to fruition.
The idea is to prepare for anything that could possibly impact your budget, timeline, and quality of deliverables, taking into account both negative and positive effects.
Especially for long-term projects and bigger budgets, risk management is critical to make sure that you can maintain control, end up profitable, and deliver the kind of quality your customers expect.
Here are 7 ways to level up your risk management process on your next project:
1. Get started early
Don’t wait until work on the project is already underway to start your risk management planning. Ideally, you want to get your risk management strategy in place during the project planning stage.
This way, you can instill a risk management culture with the project team(s), making sure everyone is aware of the potential risks and how they will respond accordingly.
If you wait too long, you may find out the hard way what happens when there’s no risk management in place at all. These unhappy consequences can include:
- Lower project profitability
- Lawsuits
- Non-compliance fines
- Loss of resources
- Fraud
- Theft
- And more.
2. Make your risk management plan a living document
If your project is more straightforward with a small team, your risk management plan might not be as nuanced. But no matter what, you want to have some form of documentation regarding the risks for the project. This will include your official risk management plan and perhaps a risk register.
The risk management plan details how you and your team will respond to various risks that could potentially impact the viability of the project. You don’t need to be able to predict risks, only prepare for them.
The risk management plan should be a living document that everyone who needs access can readily see. No matter how simplistic or complex, it’s extremely important that you document your plan that you can then refer back to both during the project and after completion.
If the project involves many stakeholders and a longer timeline, you may want to consider including a risk registry, which essentially details every possible risk that could occur and relevant information like description, timeframe, and who is responsible for managing each.
Need a leg up? Here’s a handy, free Excel risk management plan template to get you started, and this is another useful (and free) risk management template for Word.
3. Detail your process
Even if it’s simple, make sure you break down your risks and develop a process to mitigate them. Most risk management processes involve the same 5 to 6 steps, which include:
- Identifying risks- What are the risks?
- Analyzing the potential impact- What could happen as a result?
- Prioritizing risks- Which risks are more critical than others?
- Mitigating the risks- How will we respond? Who is responsible?
- Monitoring- How do we track these risks across the project?
No matter what tactics you use, i.e. avoiding, transferring, etc, it’s particularly important that you make the risk mitigation process crystal clear. That way, your team can know who is responsible for taking on each risk and what trajectory the response should take.
4. Remember the risk event and its impact are two different things
This is something that might not seem like a big deal, but in order to effectively plan for risks, you have to be able to differentiate between the impact of the risk and the risk itself.
For example, if you are purchasing supplies in another currency and that currency appreciates or depreciates in value, it will affect the budget. The plus or minus to the budget is the impact, whereas currency fluctuation is the actual risk.
You need to know the root cause of the risk, the risk event, and the steps you’ll take to mitigate the risk. To make sure you can grasp the risk events properly, it’s helpful to go about it like this:
Because of X, Y may occur, which will cause Z impact.
5. Categorize your risks
A project risk is anything that could impact project success, i.e. the budget, timeline, and quality. Accordingly, most project managers will categorize risks into these three buckets, so you have financial risks, time risks, and quality risks.
However, this isn’t the only formula to create an effective risk management plan. In this Harvard Business Review piece, the researchers suggest a different method of categorization that includes three subsets: preventable risks, strategy risks, and external risks.
Whichever way you choose to do so, categorizing your risks can help keep your risk management plan organized and help you identify synergistic ways to help you do more with less, aka kill two birds with one stone.
6. Take ownership of missteps
Don’t forget that risk management isn’t just about making a plan. It’s about tracking risks throughout the lifecycle of the project.
Along the way, you may stumble, perhaps falling victim to financial risks or issues that prolong the timeline.
To adequately respond to risks and limit their detriment, project managers need to be able to swiftly take ownership of any missteps and move on.
Rather than getting stuck on the negative aspect, the team needs to move forward proactively to compensate for any time, money, or quality that may have been affected.
Taking accountability is a huge part of both personal and professional growth, and this exercise will serve you well as you execute your risk management plan.
7. Don’t forget the positive
Risks aren’t always negative; in fact, they can present lucrative opportunities to earn higher profits and even thrill your clients. Therefore, you shouldn’t ignore potential positive risks to your project.
Just as you have trajectories in place for if/when negative risks occur, you should have a contingency plan for positive risks, so that you don’t miss out on opportunities.
Positive risks can be dealt with by exploiting them, sharing them, enhancing them, or accepting them. Don’t forget this important aspect of your risk management plan that can help you seize the moment if it should present itself.
