By Loay Dirar
Risk Management is simply defined as the process of identifying, evaluating and managing the uncertainties in a project. The benefits of risk management is to increase the probability of the project to succeed, while decreasing its probability to fail. By proactively addressing the uncertainties, problems and unwelcome sudden surprises, the failure rate of the project can decrease by as much as 60 -70 %.
The key steps to risk management are summarized below:
- Identify
- Estimate
- Evaluate
- Plan
STEP 1:
IDENTIFY your Project’s Risks:
Identifying risks, begins with brainstorming them. Ask your team members to brainstorm all the things that could go wrong or well within the project. Give each team member a set of Post-it notes and a marker pen and ask them to record the risks as they identify them.
Tape a piece of a flipchart paper to the wall and let them call out the risks, ask them to write them down, and then walk up to the paper and stick the post-it notes on the flipchart paper on the wall.
Make sure that all your team members should brainstorm together. This brainstorming method is called Write it! Say it! Stick it and it is another example of a team-based tool that uses all three learning styles: visual (Post-it notes), auditory (Say it!) and action (Stick it!).
STEP 2:
ESTIMATE your Project’s Risks:
After you’ve identified all the possible risks that could go wrong or right during the project, it’s time to define how likely it is that each of those potential problems might occur and, if they were to do so, the impact or damage that would be caused by the occurrence.
The chance that something might occur is called the risk PROBABILITY. The damage that would incur is called the risk IMPACT.
- Risk Probability
First, rate the probability of occurrence as zero, low, medium, or high. When you have consensus on the probability rating, write it in the lower left-hand corner of the self-stick note. Zero-probability risks are events we know will not occur. Move them to the side under the zero-risk heading.
- Risk Impact
Next, ask the group to rate the impact of each of the brainstormed risks. Write the rating—zero, low, medium or high—on the bottom right-hand side of the Post-it note.
- Risk Proximity
Finally, ask the group to rate how far away in time will the risk occur (if it materializes or the when will it happen).Write the rating- in days weeks months or actual calendar days.
STEP 3:
EVALUATE your Project’s Risks:
After you’ve rated each risk, it is helpful to organize them so you can see which the worst risks are. A practical way to do this is by placing each risk into a risk analysis matrix, also known as a probability/Impact Grid or PI Matrix. Draw a nine-square grid on a flipchart paper and label the vertical or y-axis as probability and the horizontal or x-axis as impact.
Note that some boxes are labeled “low.” This means that risks that fall into those squares on the matrix are low risks. The label in the squares takes into account both probability and impact. Risks that fall into the squares marked “medium” are medium risks. Number all the risks on the grid consecutively, starting at the top right and working down to the bottom left. The order is not particularly important; just assign a unique number to each risk. It will make it easier to keep track of them later.
STEP 4:
PLAN & your Project’s Risks Responses:
After you’ve rated the overall risks, it is time to react and develop a Risk Response Plan. In order to do this you have to categorize the risks inside the PI Matrix into low, medium or high groups, brainstorm ways to prevent the risk from occurring or reduce the probability and/or impact of the risk.
The most common negative risk responses are:
- Reduce
- Share
- Avoid
- Transfer
- Fall-back
- Accept
The most common positive risk responses are:
- Reject
- Share
- Exploit
- Enhance
At last but not finally, come back to the impact and probability ratings for each risk in a regular manner, and write the new impact and probability ratings above the old ones on the risk Post-it note.