In project management, there is no such thing as “zero risk.” What’s more, unmanaged or poorly managed project risk can expose an organization to significant harm. That’s why risk monitoring and management – which can be defined as the process of identifying risks and devising ways to address them – is so crucial. Fortunately, you can simplify the ongoing challenge of monitoring project risks with a straightforward procedure. All you’ll need are the right tools and strategies.
The Philosophy Behind Project Risk Management
The PMI’s 6th Edition of the PMBOK Guide introduces a significant change in how many project teams approach risk. Instead of focusing on “controlling” risks, PMBOK suggests focusing on “monitoring” them.
Accordingly, it describes the process of monitoring project risks as:
- implementing established risk response plans
- tracking identified risks
- identifying new challenges as they arise
PMOs strive to achieve these goals and are tasked with evaluating the effectiveness of their risk procedures throughout a project’s life cycle.
The rationale behind this edit is easy to grasp: risks are, by nature, outside of your control. They belong to the realm of uncertainty — otherwise, they wouldn’t be risks! Therefore, there is no point in hoping to shield your projects, portfolio, or organization from risk completely. But you can and should identify, evaluate, monitor, and mitigate them.
5 Steps to Effectively Analyze Project Risks
Monitoring project risks is essentially about managing changes (both expected and unexpected) to the project. Following the PMI’s definition of risk monitoring, we suggest a 5-step approach:
- Identifying and analyzing the risks to your projects
- Coming up with appropriate response plans for each risk
- Tracking the evolution of the risk landscape
- Identifying new risks as they arise
- Running and evaluating the effectiveness of response plans
Let’s explore each step in more detail.
Step 1: Identify Risks
The first step is to recognize threats to your projects and portfolios. Try to determine what could threaten your projects’ cost structure, schedule, or scope.
Then, analyze the threat’s nature, probability, and potential impact. This will help you qualify and quantify, categorize and prioritize, and create a reliable mapping of your project risks.
Risk management professionals usually break down risk into four main families, which you can use as a guide as you complete this stage of the process:
- Technical risks, which include technology- or production-related risks
- External risks, which might include challenges from the market, consumers, regulations, or even the weather!
- Organizational risks, which can be tied to resources, funding, and project dependency
- Project management risks, which include threats to planning, culture, and collaboration
Step 2: Prepare & Monitor Specific Risk Response Plans
Each and every risk requires a planned response. Some risks warrant immediate, decisive action. For instance, if a key supplier fails to meet an important delivery deadline, one must activate plan B — i.e. placing an order with another vendor — without delay. On the other hand, if your supplier increases the price agreed upon for delivery, your response plan may involve less urgent yet more complex trade-off decisions.
In any case, we recommend you assign a person responsible for managing each risk (the ‘risk owner’). They will also evaluate and execute the response plan, working with PMs to adjust as needed.
Step 3: Track Identified Risks
Risk owners, project managers, and portfolio managers should work together to track the overall risk to their projects over time, ensuring that the agreed-upon response plans are activated promptly when the related trigger conditions occur.
The support of a dedicated risk and project portfolio management (PPM) tool like Sciforma is crucial here. Leveraging software that can help you break down the metrics behind risks, anticipate future challenges, and make this information visible to all stakeholders ensures that risk realization doesn’t go unnoticed.
Risk tracking also involves regularly reviewing and reassessing project risks and the planned response plans. As the project progresses and market or business conditions evolve, you may discover that some of the threats you had identified are no longer relevant or that some risks are more or less threatening than you had initially assumed. That brings us to our next step.
Step 4: Identify New Risks Along the Road
The world changes. Projects change. This also means that new risks arise over time. Major changes to the project or its environment, such as a reshuffle in leadership or a key technology breakthrough, may bring about new risks and threats to your projects.
It is essential to identify new contingencies early and analyze them appropriately to keep your risk mapping up to date.
All of this nuance and potential for change further highlights the need for a comprehensive tool that helps you automate, revisit, and expand your risk management processes.
Step 5: Evaluate the Effectiveness of Your Risk Management Process
Actual performance doesn’t always match planned performance. Some risks may have been overlooked or misestimated (sometimes with reason: it is impractical to plan for outliers, yet they can and do happen!). Or, the response plan may not stand the test of reality. That’s why it’s critical to candidly and objectively assess the results of your project risk monitoring and response strategy to pave the way for continuous improvement.
Monitoring Project Risks: The Bottom Line
It may not be possible to entirely avoid challenges throughout your projects’ life cycles, but that isn’t necessarily bad. Without risk, there is no reward. With an effective risk management process, your organization can accurately predict, identify, and address project risks before they hold you back. No matter what, you can count on Sciforma to help you access the insights your team needs to make strategic decisions about risks.
