Risk Management - ITM Platform | Projects Programs Portfolio

The existence of risk is inherent in absolutely everything we do in life. All activities are subject to some degree of uncertainty.

Risk in project management can be defined as a change in the market environment or the product, that may influence its development.

When implementing a project, no matter how well planned and well organized, there is always a certain margin for error, we can call this the level of risk within the project.

The impact a risk has on a project should not necessarily be detrimental to the project. If preparation is done correctly then managing these changes will be straightforward and thus the consequences on the outcome of the project will be minimal.

If we are able to react adequately to this risk, we can benefit from it and improve our product, our sales or customer satisfaction.

Therefore, the best way to reduce risk exposure is proper planning. When planning, the risks should be addressed from a realistic perspective which allows you to understand them and put into place action plans if they do arise. You should never ignore the existence of the risks, they could be detrimental to your project, and hence they must be controlled.

In order to properly assess the risk exposure within your project, you may find it helpful to use a specialized software. At ITM Platform we offer you a new free risk assessment matrix tool online that allows you to create risk sets in a simple, graphical and intuitive way. You can quickly and easily plan your risks, allowing you to reduce uncertainty in your projects while focusing more of your attention on other tasks.

Good planning is essential, so that the project manager and the company as a whole know how to respond to the emergence of risks. Proper risk management can convert potential weak areas into strengths. In Japanese, the word crisis is formed from the words: "danger" and "opportunity".

The Project manager should be able to turn risks from potential dangers into opportunities.

What are the main sources of risk?

Scope risk

Throughout the development of a project, its scope may change. A project will grow in complexity as customers add new requirements and this may extend or modify the scope. Such changes are common since the product must meet the needs of the market which is constantly changing.

Planning risk

The reasons why a project may not develop as initially planned may not necessarily be the mistakes of the development team, but may be due to external circumstance.

Delays in the supply by an external provider, an accident or any other unforeseen, uncontrollable circumstances, can alter the initial plan. Therefore, proper planning should cover all possible scenarios and the probability that a scenario will arise, such that the resulting impact will be minimal. In this case it can be very useful to develop a risk assessment matrix.

Resource risk

The resources that are available during the course of a project can also fluctuate. Although initially budgetary resources are a defined amount, it is possible that during the project development the economic situation of the company may change due to external factors such as the market or macro economy.

In these circumstances, the project manager will have to do what they can with whatever budget is assigned, eliminating those tasks that contribute less to the project whilst trying to ensure an outcome that meets the minimum requirements necessary for the project to be successful.

On the other hand, human resources may also experience changes. The staff starting a project may not necessarily be the same as the staff who finish the project. In addition, new members could potentially join the team during the project, and therefore will take some time to adjust. This will, at least temporarily, lower the efficiency and productivity.

Technological risk

Using software and other utilities inadequately, could lead to a decrease in your productivity. If there are technological problems, this will delay or hinder the delivery of your projects.

To avoid such problems, we put at your disposal a leader in project management software. So, at least for this part, you can breathe easy.

Once you know the source of risks that may occur during the execution of your project, it will be easier to identify them and include them in your planning. Which will allow you to develop contingency plans to remove, transfer, mitigate or, if no other choice, accept them.

With these techniques, you can rest assured that the risk management of your projects will be successful, and the impact to your company will be minimal.

At ITM platform we understand the business world perfectly, because leaders of various sectors use our project management software.

Try it out and discover what it can do for you:

https://www.itmplatform.com/en/projects-programs-portfolio-subscription/

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Let’s face it, even if you have the utmost confidence that your project will be a success, there is always the possibility something can go wrong. Wise project managers will identify the project risks in the early stages of the project to give themselves more time to develop a plan on how they can avoid them if they arise. However, risk management is an ongoing activity and can’t be done just once.

Here are a few key components of risk management:

A Contingency Plan

Essentially, this is a plan developed to help the company respond to a possible future situation that could occur but isn’t outlined in the original or “expected” plan. The project team will find solutions ahead of time in the case that the problem appears. A contingency plan is also often referred to as being “plan B”, one which can be put in place in only a moments notice.

For instance, suppose the completion of a product significantly depends on purchasing a component from a supplier. Although for whatever reason, the deal is unable to be made which can set the end date of the project way behind schedule. To prevent crisis from occurring, project managers will use contingency plans that will be implemented immediately to resolve the issue.

The Risk Assessment Matrix

This is a well known project management tool increasingly used in risk management. In a single page, it will organize all of your possible risks based on their likelihood of occurring and the severity of their consequences. You will need this in order to develop an effective risk mitigation plan and project strategies.

The risk management matrix can only be completed after you have filled out a risk assessment form. In this form you will have to uncover and list out all potential risks that may be a threat to your project or company. You will need to gather data about these possible risks, understand their consequences, determine the probability of them occurring and brainstorm possible prevention strategies.

The risk assessment matrix will then be able to provide the project management team with a quick and useful overview of the risks to help them prioritize which should be dealt with first.

The team will need to work together to decide which level of risk can be tolerated and which ones should just be “accepted” and left to be watched. Our new free tool for risk analysis allows you to register, quantify and share risks. You can also save different sets of risks, such as those for a project, business, process or any other context in which you are working. You can share them collaboratively as well.

Each circle represents the estimation of a risk. Colors and sizes of circles depend on the exposure level of the risk. They are fully configurable, simply click on the “customize values and thresholds” tab.

If you click on the “see matrix” button in each of the risks, you’ll be able to see all of the possible combinations for impact, probability and place of the product; i.e the numerical value of the level of risk exposure.

Risk Mitigation Planning

This process involves creating possible options to help strengthen future opportunities and reduce threats to your project objectives. It will require project management team members to continuously track the current identified risks while searching for new ones. They will also need to evaluate how successful the risk management process is throughout the development of the project.

It is best if you refer back to the chart below when applying risk mitigation. The Risk Mitigation Handling Option you choose to use will once again depend on the probability of a risk occurring and the severity of its costs. There are several handling options that can be used:

Avoid: You can change your current project requirements to reduce the risk from occurring. However, don’t be surprised if this also impacts your schedule, funding, etc.

Control: Implement new actions to diminish the impact the risk will have.

Transfer: Reassign the projects responsibility or authority to another stakeholder willing to take on the risk

Watch: Constantly monitor the project and its environment for any changes that may impact or increase the risk.

Assume: You may choose to acknowledge that a particular risk exists and then willingly make the decision to accept it without trying to control it in any way.

In a nutshell, risk mitigation planning requires you to think about the probability of the risk occurring and materializing as well as the impact it will have on your objectives if it does.

Steps to Risk Management

Simply put, risk management is a 2 step process that starts with determining what risks exist and then handling those risks. Although, you should develop an action plan which includes all of the 5 steps mentioned in the PMBok:

Step 1: Initiating

This step is all about brainstorming. You will need to determine the project manager, the company culture and understand the business case. You must review and uncover possible risk sources by determining initial constraints, requirements, assumptions and agreements. If you have an strong project management tool, like ITM Platform, you will be able to categorize and prioritize risks depending on if they have a high impact or high probability of occurrence.

Step 2: Planning

This stage involves developing a plan for each knowledge area. To do so, you must perform risk identification, qualitative and quantitative risk analysis and risk response planning. Once this is done you will need to finalize your management plans by developing a performance measurement baseline. By doing so, you will now have successfully developed responses to the risks you previously uncovered.

Step 3: Executing

From here on you will want to execute all of the work being done according to the PM plan you have created in the previous stage. Look to continuously improve by following the processes but also implementing approved changes. You must determine whether the processes are effective by evaluating individual or team performances and performing quality audits. Make sure you give strong feedback as well as recognition to employees when a job is well done. Following your management plans will reduce risk likelihood but will also prepare you in case something does arise.

Step 4: Monitoring & Controlling

With change can come brand new risks, but you will need change to occur if you want your business to grow. In this case, you must bring on change in a controlled way. Start off by measuring the performance of your team members as well as the project as a whole by comparing it to other metrics you have in your PM plan. Determine whether or not variances require corrective actions or change requests. You should request changes regardless and then update the PM plan accordingly.

Step 5: Closing

You must start off by assessing whether the work completed is done based on the requirements listed previously. Gain acceptance over the final product and then hand it off to be able to receive customer feedback. After this is all done you should record the lessons you have learned, all of the risks you may have encountered and the knowledge gained. All of this will help you out in the future.

Risk management isn’t an easy task and it’s natural to feel unsure on how to go about it. The best thing you can do is implement a PM tool that will help you with the process. ITM Platform provides their users with a new and innovative tool to help with calculating and managing project risks. Furthermore, their friendly and supportive staff has your back every step of the way so you’ll have no need to worry.

Visit http://www.itmplatform.com/en/ to find more information.

Top 5 most read blogs on ITM Platform:

The Monte Carlo Method in Project Management

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Risk can be defined as an uncertain event or condition that, if it occurs, has a negative effect on a project’s objectives.

We must be able to manage this uncertainty and therefore manage risks proactively and efficiently, not just complain about things that happen to us and were apparently out of our control. Proper risk management can make our project avoid, or at least minimise, the negative impact of these problems.

Risk management is one of the knowledge areas that Project Managers need to manage efficiently.

The first and most important step is to identify the risks by asking ourselves: What could happen that may significantly impact the project? It is considered that a risk has a cause and, if the risk occurs or materialises, a consequence or effect. It is important to establish the causes and effects when identifying the risks, in other words, clearly expressing what could happen and how it would affect us.

Once the risks have been identified, they should be assessed according to two criteria:

- The probability of the risk occurring.
- The impact the risk has on the project objectives.

By using this assessment, we will be able to calculate our exposure to each risk. If we assign a numerical value to probability and another to impact, a simple multiplication can be performed using the two values to generate our risk exposure.

The priority will be to manage those risks to which we are most exposed, in other words, those with the greatest probability and impact. There is not much sense in managing risks that are highly unlikely to occur or risks that would have almost no impact on our project.

In order to manage risks correctly, it is important to define a risk manager. Just like many other aspects of management, risks have a certain tendency to be the subject of long conversations in which nobody really takes responsibility for tackling the situation.

Once risks are properly identified, assessed and assigned, response plans need to be executed to reduce our risk exposure. Risk responses are mainly of two types:

- - Risk Mitigation Plan: this response aims to reduce risk probability before occurrence.
  - Risk Contingency Plan: this response aims to get ready to reduce risk impact after occurrence.

Risk response plans can take many forms and it is not possible to establish general guidelines. Past experience and creative thinking helps a lot when looking for the best “solution” to manage each situation. However, it is important for all risk management to be recorded and thus enable everyone responsible for the project to be made aware of it.

Only by using a tool such as ITM Platform will it be possible to gain an understanding of our risk management and create a knowledge base for ensuring greater success in future projects.

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Projects are carried out within an organization whose culture, style and structure influence the way in which these projects are carried out. Project managers should be aware of this reality and adapt to the environmental factors of the organization where the project is developed.

Improve the information systems that support your projects with ITM Platform

It’s worth beginning with a caveat: the environmental factors of a project should not be confused with considerations of the environmental impact of an organization's activities, which are especially important in the case of public works or industrial activities that could result in chemical waste or other forms of pollution. While these assessments are limited to certain areas of activity and are highly regulated in most developed countries, environmental factors always exist in each and every project: from a small-scale internal project to a macro-project of hundreds of millions of dollars in budget.

The notion of environmental factors in a project is much more general, referring to all circumstances surrounding the project during its execution. Thus, we can consider environmental factors as all the conditions that are beyond the direct control of the project team and that influence positively or negatively on the project. All these conditions must be considered in project management and vary significantly in type and nature depending on the organization.

As a reference, the main environmental factors that can affect project management can be classified into three categories; organizational, human resources and technological systems.

Environmental factors inherent in the organization

Shared vision, mission, values, beliefs and expectations of the organization
Culture, structure and organizational governance
Availability and geographical distribution of facilities, resources, infrastructure and materials
Industry or government standards that affect the organization
Internal standards, policies, methods and procedures

Human Resource environmental factors

Existing human resources, skills and knowledge
Personnel management, motivation systems and incentives
Perception of leadership, hierarchy and authoritative relationships
Organizational risk tolerance
Project stakeholders and organizational stakeholders

Technological environmental factors

Operational environments and company authorization systems
The formal and informal communication channels established in the organization
Available databases
Project management information systems

In addition, the environmental factors of a project can be classified as internal and external factors. While internal factors will be stable for each organization independent of the project, external factors are more susceptible to change and require superior analytical attention from the project manager. For example, the location of the project in a country where it has never been worked will expose itself to an unknown regulatory environment, generating many risks in terms of legal feasibility, the labor framework, etc.

It is essential that each organization knows which of the internal factors act as limiting conditions and which are the drivers of the projects. It is appropriate that this analysis be shared.

In project management, it is possible to influence those factors that are closer and more directly related to management, such as resources or project management information systems, but it will be more difficult to affect the more general cultural and environmental factors or external to the organization. For example, although it may seem that organizational culture is a flexible factor and can be easily shaped, it is necessary to always consider the inertia produced by resistance to change and how such culture is not an abstract idea, but is part of the daily practices of all members of the organization.

Changing environmental cultural factors that are more detrimental to effective project management can be a much longer and more expensive decision than to just support such management with new information systems. In turn, the adoption of new information systems can serve as a catalyst from which to modify the behavioral aspect of human factors, influencing the corporate culture from its base.

In all cases, the project manager must be aware of these factors and act accordingly, including the project risks to the detrimental environmental factors over which the project manager cannot exercise any control and communicating to all his team the importance of being alert about signals indicating the emergence of the risk or the change in environmental circumstances.