Risk

Risk Management Deeper Dive Part 4 – Risk Mitigation Strategies

Professor of Project Management Project Execution and Monitoring, Project Planning ,
Executing Monitoring and Controlling

With your risks identified, prioritized and monitored, it is now time to develop strategies for managing the risks. The first type of strategy is “Risk Mitigation”. These are actions you can take before a risk occurs that can reduce the exposure to the risk. You should brainstorm these strategies with the members of the project team you identified in the Risk Management section of your “Project Management Plan” (refer to prior posts on this topic).

There are four mitigation strategies you can employ:

  1. Risk avoidance – this is the most expensive of the risk options. You can spend money or resources to eliminate the risk. An example would be if you have a lesser skilled resource assigned to a task, which raises a risks of on-time completion and/or deliverable quality, you can spend more money for a resource skilled enough to eliminate those risks.
  2. Risk limitation – this is the most common strategy. You take some action to reduce the probability and/or impact of the risk. One example would be if you are concerned about server downtime or performance during peak loads, you can implement redundancy and load-balancing to mitigate this risk.
  3. Risk transference – involves handing off the risk to another (willing) party. Examples are buying insurance, or outsourcing services.
  4. Risk acceptance – if the cost of mitigating the risk outweigh the cost of the risk itself, you may choose to just accept the risk with no mitigation actions. This strategy is typically employed for risks with low probability and/or low impact.

Documenting your mitigation strategies puts you in control of the project. You can manage your risks or they will surely manage you.

Note: Much more detail on Risk Management can be found in my book “Project Management For The Real World”, available in paperback and Kindle formats at

http://www.amazon.com/dp/b089krddvn

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Risk Management Deeper Dive Part 3 – Risk Triggers

Professor of Project Management Project Execution and Monitoring ,
Executing Monitoring and Controlling

In this series Part 1, I addressed Risk Identification. In Part 2, I addressed Risk Probability, Impact and Exposure. In this entry I will discuss the concept of the “Risk Trigger”.

An important aspect of Risk Management is knowing and detecting that the risk has occurred. This is know as a “Risk Trigger”. In some cases it may be obvious. An example of this would be a risk such as “If the project team loses key resource “A”, then the task estimates assigned to “A” will need to be extended which may impact key milestone commitments”. In most cases the PM will know when they have lost a key resource. However, in the case of very large project teams, the key resource may be embedded deep in the project hierarchy, hiding the loss unless there is a communication plan to notify the PM

Your risk triggers must define the method you will use to monitor the risk. For example, if there is a possible change to a government regulation that will impact your project, you can engage your Legal team to monitor the status of this regulation on a regular basis and report any changes directly to the PM.

Here is another example: if there is a risk your server capacity is insufficient to meet peak demand, you might direct your technical team to establish monitors for CPU and disk usage and raise a flag if they are approaching the safe limits.

The lesson here is don’t assume you will just know when a risk has occurred. Define Risk Triggers (even the obvious ones) for all of your risks.

Now that you know your risks, exposures, and when they occur, the next step is to manage them with mitigation and contingency plans. I will tackle these topics in the upcoming posts.

Note: Much more detail on Risk Management can be found in my book “Project Management For The Real World”, available in paperback and Kindle formats at

amazon.com/dp/b089krddvn

#projectmanagement

Risk Management Deeper Dive Part 2 – Risk Prioritization

Professor of Project Management Project Execution and Monitoring
Executing Monitoring and Controlling

After you have identified your risks, the next step is to prioritize them. We do that by assigning a probability rating and an impact rating, then combining the two to determine your exposure (i.e. priority).

The Risk Probability is a measure of the likelihood of the risk occurring. In most cases it is difficult to assign an exact probability. It usually will be sufficient to define probabilities as “High”, “Medium”, and “Low” and define these probabilities as ranges. Here is an example of the ranges I typically use:

  • High = 70% or greater probability
  • Medium = between 40 – 69 % probability
  • Low = less than 40% probability

You can use whatever definition you choose as long as all of the parties helping you assign probability are aware of the defined ranges.

The Risk Impact is a measure of the effect of the Risk occurrence on the schedule, scope, budget and quality of the project. Again, since in most cases this may be difficult to quantify, using ranges represented by “High”, “Medium” and “Low” will suffice. Here is an example of range definitions for Risk Impact:

  • High = greater than 10% impact on one or more of schedule, scope, budget and quality
  • Medium = 5-10% impact on one or more of schedule, scope, budget and quality
  • Low = less than 5% impact on one or more of schedule, scope, budget and quality

The Risk Exposure is a product of both the Risk Probability and the Risk Impact. It is also measured as “High”, “Medium” and “Low” if that is the way you defined the probability and impact. Here is how the Risk Exposure can be determined:

  •  Probability (High) + Impact (High) = Exposure (High)
  •  Probability (High) + Impact (Medium) = Exposure (High)
  •  Probability (High) + Impact (Low) = Exposure (Low)
  •  Probability (Medium) + Impact (High) = Exposure (High)
  •  Probability (Medium) + Impact (Medium) = Exposure (Medium)
  •  Probability (Medium) + Impact (Low) = Exposure (Low)
  •  Probability (Low) + Impact (High) = Exposure (Medium – but watch closely due to impact)
  •  Probability (Low) + Impact (Medium) = Exposure (Medium)
  •  Probability (Low) + Impact (Low) = Exposure (Low)

Now that you have your Risk Exposure determined you should monitor and act on them in order of exposure, with the ones rated “High” given the most attention. This will help you allocate your risk management resources appropriately.

Note: Much more detail on Risk Management can be found in my book “Project Management For The Real World”, available in paperback and Kindle formats at

http://www.amazon.com/dp/b089krddvn

#projectmanagement

Risk Management Deeper Dive Part 1 – Risk Identification

Professor of Project Management Project Execution and Monitoring ,
Executing Monitoring and Controlling

The first step in managing risk is to identify the risks you need to manage. This is the most important step in risk management and something new project managers tend to struggle with. I will present some techniques that have over the years have worked well for me.

  1. What worries you? – You can ask this question to your project team members and stakeholders. Do this first individually, then in groups. Many do not understand the term “risk” as it applies to projects and may come up with a blank if you ask them about risks. Everyone can relate to the term “worry” and I have found this helpful. You may get answers such as “I don’t have enough resources” or “the timeline is too tight” or “I don’t have enough expertise on my team in this area”. These types of answers are a great start in risk identification.
  2. The “Pre-Mortem” – We are familiar with doing “lessons learned” and “post-mortems” on projects. Doing a “Pre-Mortem” can help identify risks. You ask the project team and stakeholders  “It’s 9 months from now, the project is over and it was a disaster. What are the reasons?”. Your mind works better at identifying risk when looking backwards so this technique can be very effective. You may get responses like “The Sponsor wasn’t involved in decision making” or “We didn’t train the staff on the new tools”. These types of answers are risks that need to be managed. You can also ask the opposite question: “It’s 9 months from now, the project is over and it was wildly successful. Why?”. Responses like “Mary Jones was assigned as the technical lead” or “The Steering Committee made prompt decisions” will help you identify risks and mitigate them.
  3. Risk Breakdown Structure(RBS) – if you Google this term you will find many examples. An RBS is simply a hierarchy of areas in which risks can occur. You would present each of these areas to the team and brainstorm potential risks for each area. Here is a sample RBS:
  • Technical
  • Technology
  • Complexity of Interfaces
  • Performance and Reliability
  • Quality
  • External
  • Vendors
  • Regulatory
  • Market
  • Customer
  • Weather
  • Environmental
  • Government
  • Internal
  • Dependencies on other projects
  • Resources
  • Funding
  • Requirements
  • Resistance to change
  • Inexperience
  • Schedule
  • Equipment
  • Quality
  • Customer Satisfaction
  • Project Management
  • Estimates
  • Plans
  • Controls
  • Communications
  • Scope

You should state your risks in a consistent manner. A common way to phrase your identified risks are: “If (risk event occurs), then (impact to project in terms of scope, schedule, cost, quality)”

Here is an example: “If the vendor is late delivering Component X, then we may not be able to meet the project milestone for the first build”. Note that I stated “may” not “won’t”. Remember, risks are probabilities, not certainties. If it is a certainty, it is an issue, not a risk.

Note: Much more detail on Risk Management can be found in my book “Project Management For The Real World”, available in paperback and Kindle formats at

http://www.amazon.com/dp/b089krddvn

Risk Management Deeper Dive – Introduction

Professor of Project Management Project Execution and Monitoring ,
Executing Monitoring and Controlling

When I teach project management principles to non-professional PM’s, I emphasize that the two things you must do to greatly increase your chance of success are (1) create a complete Project Charter, and (2) manage risk. Those two practices, when done well, contribute to the bulk of project success.

In previous topics I discussed Risk Management in two places:

  1. The Project Charter
  2. The Project Management Plan

In the Project Charter, only the initially identified high exposure risks are typically listed and you may not yet have fully developed mitigation and contingency plans. In the Project Management Plan, the Risk Management Plan describes the process of risk management but it does not address the specific risks.

In the “Risk Management – Deeper Dive” series of posts, I will present the following topics in detail:

Part 1: Risk Identification

Part 2: Risk Prioritization (probability/impact/exposure)

Part 3: Risk Triggers

Part 4: Risk Mitigation Strategies

Part 5 : Risk Contingency Plans

Part 6: Risk Ownership

Part 7: Risk Monitoring

Managing risk is a key project management best practice. I strongly suggest you make this one of the first areas of mastering project management.

Note: Much more detail on Risk Management can be found in my book “Project Management For The Real World”, available in Kindle and paperback formats at

http://www.amazon.com/dp/b089krddvn

The Project Management Plan – Risk Management

Professor of Project Management Project Planning , ,
Planning

Managing risk stands along with having a well-defined Project Charter as the two most important disciplines of Project Management. Having a documented plan for how you will manage risk will help enforce the practice.

In a future post I will describe the metrics that are used to measure the health of a project. One of these measures is Risk Management. The health of managing risk is “green” (which is good) if you have a sponsor-approved plan for managing risk and are adhering to it.

The Risk Management Plan addresses the following:

• Identify the template to be used as the Risk Register.  Include column definitions and an example. In a future post, when I elaborate on Risk Management, I will identify the key components of a Risk Register

• Include the procedures you will use to identify, monitor and escalate risks. This includes identifying who will participate in Risk Management sessions.

• Identify standard checklists or historical risk information you can use for Risk identification

My book, “Project Management For The Real World”, is available in both paperback and Kindle formats at

http://www.amazon.com/dp/b089krddvn

The Project Charter – Risks & Assumptions

Professor of Project Management Project Initiation
Initiation

In upcoming posts I will discuss Risk Identification and Management in detail. For now, you just need to know that a risk is an uncertain future event that can have a negative impact on your project’s schedule, scope, budget or quality. The event has a probability of occurring less than 100% and greater than 0%. If the probability is 100%, then you have an issue, not a risk. Some risks can have a positive impact but we will not discuss that here.

You state the risk as follows:

  • If <risk event> occurs, then <state the outcome that affects your project> causing the project  to be impacted in the following specific ways <scope, schedule, budget, quality>.

At the Project Charter level, you are interested in identifying only the highest impact risks so that your risk management strategies can be accounted for in the scope and schedule.

Some Project Charters will list “Assumptions” in its own section. I have eliminated assumptions from my own charter template as I feel if you have assumptions that can impact your project, then that is just another form of risk. I now include any assumptions in my risk section.

My Kindle book, “Project Management For The Real World”, is available at

http://www.amazon.com/dp/b089krddvn

Now available in paperback!

Risk Management Deeper Dive Part 7 – Risk Monitoring

Professor of Project Management Project Execution and Monitoring ,

Executing Monitoring and Controlling

In this final part of “Risk Management Deeper Dive” I will briefly discuss “Risk Monitoring”. Monitoring your risks involves the following:

  • Conducting regular meetings (as outlined in the Project Management Plan) where the risks and risk plans are reviewed. I recommend every week or every other week depending on the levels of risk exposure.
  • The Risk Owners, the Project Sponsor(s) and the Project Manager(s), at a minimum, should be present at the meetings.
  • In the meetings you should review the risks in order of risk exposure, with the highest exposure risks addressed first. In case your meeting time is limited, this ensures the most important risks are discussed.
  • The risk probabilities and impacts are reviewed and changed as needed.
  • The risk triggers are reviewed to ensure reliable monitors are in place. Any triggers tied to a near-term upcoming date are reviewed in detail.
  • Risk mitigation plans are reviewed to confirm the plans are being executed.
  • Risk contingency plans are reviewed to verify the plans are still valid.
  • Close any risks that are no longer valid.
  • New risks are raised and discussed. You can continue to use the Risk Hierarchy chart to help identify new risks.

After each meeting, the updated risk plan should be posted to the project repository. Open high-exposure risks should be highlighted in the project status report.

Note: Much more detail on Risk Management can be found in my Kindle book “Project Management For The Real World”, available at

https://www.amazon.com/author/lettera

 

 

 

Risk Management Deeper Dive Part 6 – Risk Ownership

Professor of Project Management Project Execution and Monitoring ,

Executing Monitoring and Controlling

A Risk Owner must be assigned to each risk. The Risk Owner for each specific risk is responsible for identifying and executing all parts of the Risk Management Plan related to that risk. It is the Project Manager’s responsibility to regularly review the risk with the Risk Owner and update the plan with new information. The Project Manager should also make suggestions and act as a “sounding board” to assist the Risk Owner.

Here are some questions to ask the Risk Owner:

  • Probability/Impact/Exposure – Have the mitigation plans reduced the probability and or impact? Have other conditions changed that have raised or lowered the probability and or impact?
  • Trigger – Has the Risk Owner assigned someone to monitor the risk trigger? Is the method of monitoring adequate? Will the risk be detected in time to react?
  • Mitigation Plans – Are these plans still adequate? Has the Risk Owner started execution of some or all of these plans? Are there additional plans that can be added?
  • Contingency Plans – Are these plans still adequate? Are there additional plans that can be added?

It is important that the Risk Owner understands their role. Some may assume the Project Manager is taking care of it for them. Make sure the roles and responsibilities are clear to all parties.

Note: Much more detail on Risk Management can be found in my Kindle book “Project Management For The Real World”, available at

https://www.amazon.com/author/lettera

Risk Management Deeper Dive Part 4 – Risk Mitigation Strategies

Professor of Project Management Project Execution and Monitoring, Project Planning ,

Executing Monitoring and Controlling

With your risks identified, prioritized and monitored, it is now time to develop strategies for managing the risks. The first type of strategy is “Risk Mitigation”. These are actions you can take before a risk occurs that can reduce the exposure to the risk. You should brainstorm these strategies with the members of the project team you identified in the Risk Management section of your “Project Management Plan” (refer to prior posts on this topic).

There are four mitigation strategies you can employ:

  1. Risk avoidance – this is the most expensive of the risk options. You can spend money or resources to eliminate the risk. An example would be if you have a lesser skilled resource assigned to a task, which raises a risks of on-time completion and/or deliverable quality, you can spend more money for a resource skilled enough to eliminate those risks.
  2. Risk limitation – this is the most common strategy. You take some action to reduce the probability and/or impact of the risk. One example would be if you are concerned about server downtime or performance during peak loads, you can implement redundancy and load-balancing to mitigate this risk.
  3. Risk transference – involves handing off the risk to another (willing) party. Examples are buying insurance, or outsourcing services.
  4. Risk acceptance – if the cost of mitigating the risk outweigh the cost of the risk itself, you may choose to just accept the risk with no mitigation actions. This strategy is typically employed for risks with low probability and/or low impact.

Documenting your mitigation strategies puts you in control of the project. You can manage your risks or they will surely manage you.

Note: Much more detail on Risk Management can be found in my Kindle book “Project Management For The Real World”, available at

https://www.amazon.com/author/lettera