Beginners Guide to Project Risk Management

Why is it most of the articles about project risk are long, boring and complicated. If you are lucky, you get half way through before falling asleep. The reality is it does not need to be long, boring or complicated. There are only 5 things you need to do once you have identified a risk on your project.

In this article, I will show you the 5 steps you need to take to reduce the chance that a risk will impact on the successful delivery of your project. Also, I will show you a quick and easy way to find out what the risks are on your project. The first thing I will do in this article shares a short story where I did not identify a risk on my project and what happened. After the short story, I will give you a quick and easy explanation of what a risk is and then I will move on to my easy method of identifying risks before finishing up with the 5 steps you need to take once you have found a risk. By the end of this article, you should have all the tools you need to quickly identify and deal with a risk before it becomes a problem on your project.

Get your free copy of the ebook Beginners Guide to Project Management. Download Now.

How Not Identifying a Risk Affected my Project

Many years ago I had a project to build a new data centre. The project was very complex which involved working with builders and electricians right through to IT professionals. The brief I was given was to find a location, build a data centre and get it up and running with all the company systems.

The project was going well with the building work complete, and it meant the project was on time and budget. The last stage before the IT equipment could be installed was the glueing down of the antistatic floor. This flooring was essential as it would make sure none of the equipment would experience static shocks which could break it. The day after the flooring was complete the new battery back up power suppliers were due to be delivered. Confident with how the project was going I went to visit the site and congratulate the build team on finishing on time. I casually mentioned to the guy fitting the floor that the power supplies were being delivered tomorrow. He said to me “You don’t want to do that mate as this glue for the floor takes 3 days to dry” My heart sank as this was going to be a problem. I needed to find somewhere to store these large power supplies. In a blink of an eye, my project went from on time to 3 days behind schedule, and there was nothing I could do.

Had I taken the time earlier in the project to identify the risk that the build might be late I could have scheduled the power supplies to be delivered later and arranged other work to take place in the time between the build and the fit out of the equipment. Lesson learnt, a little bit of risk management saves a lot of fan cleaning later.

A little bit of risk management saves a lot of fan cleaning later. Click To Tweet

How to Find Risks on Your Project

Before I go on to explain how to quickly identify risks on your project, it is probably worth explaining what a risk actually is. A risk is something that may happen at a later date which could impact on the project. Risks and issues are often confused. The way I remember it is an issue has already happened, and risk is yet to happen.

The best way to identify risks on your project is to go and speak to your team and ask them what could go wrong. Also, ask what do they need to have to successfully do their tasks. If they are waiting on someone else for something how can you make sure that it arrives on time and does not hold them up. Make sure you take the time to talk and really listen to the negative team members. You know, the ones that always look at the downside of everything. These people are your best source of information when trying to find out the risks. It may be nothing, but at least by knowing about them, you can investigate and find out if they are something to worry about or not.

That is all there is to it simply speak to your team and say “What is the worst that could happen?”

The 5 Steps to Managing Project Risk

Once you have identified a risk, there are 5 things you need to do. By doing these 5 things, you will understand how the risk will affect your project and what will be done about it. By doing these, you will dramatically reduce the chance that the risk will cause your project a problem.

Step 1: Probability
On a scale from 1-3 (where 1 is low and 3 is high) what is the chance of the risk occurring. Essentially are you or your team certain it will happen if so then score 3. If you or your team think it is pretty unlikely that it will happen then score a 1. If you are not sure, then the score is a 2.
Step 2: Impact
On a scale from 1-3 (where 1 is low and 3 is high) what is the impact that the risk would have on the project if it happened. The thing in terms of time and cost a little bit late or money is a 1. If it will make the project stop or miss a deadline that you have been given then it is a 3. The same with the cost if you will exceed any budget tolerances then it is also a 3. If the project can still keep going but will have a big delay or a large budget impact, then it is a 2.
Step 3: Severity
With the Probability and Impact identified the next step is the severity which is understanding if it is a high, medium or low risk. To work this out, you need to multiply the probability and the impact together. For example, if your probability scored a 3 and your impact scored a 2 then 3×2=6. The 6 is your severity score. In this case, this is a high risk.

1= Very Low Risk
2= Low Risk
3= Medium Risk
4= Moderate Risk
6= High Risk
9 = Very High Risk

Step 4: Proximity
The proximity is the earliest date that the risk could occur. The reason for identifying a date is so you know how long you have to do something about the risk if you need to reduce the chance of the risk occurring.
Step 5: Countermeasure
After you have identified the severity of the risk the final step is to decide what you are going to do about it to either prevent the risk from occurring or reduce the impact the risk will have. In my example, I should have allowed more time for the building work to be completed and therefore reduced the impact of being late on subsequent tasks. As a general guide depending on the severity score, this is what I do with my project risks.
1= Very Low Risk – Take no action, just record it and move on
2= Low Risk – Make project team aware of the risk, record it and carry on
3= Medium Risk – Make project team members aware, monitor the risk and regularly check the probability or impact does not increase
4= Moderate Risk – Make stakeholders aware as well as the project team. Consider taking action to reduce the chance or impact of the risk occurring. May take no action if the mitigation is too expensive or time consuming
6= High Risk – Do something to reduce the chance that the risk will occur and try to reduce the impact. Make all stakeholders and project team members aware of the risk.
9 = Very High Risk – Take immediate action to reduce the chance that the risk will occur and take steps to reduce the impact. Make all stakeholders and project team members aware of the risk.

That is it. If you do these 5 things, then you are doing a lot more than most people do on their projects and by doing so, you greatly increase the chances that you project will be a success. So next time on your project just remember to do the following:

Talk to the project team to identify the risks. Making sure you listen to the negative people.
Once you have identified the risk, follow the 5 step process for understanding how the risk could affect your project.
Step 1: Probability
Step 2: Impact
Step 3: Severity
Step 4: Proximity
Step 5: Countermeasure

I hope you have found this useful and wished you every success on your project. If you would like more tips on how to management projects successfully including getting hold of the templates that I use then, please just add your email address below.