The benefits of risk management in projects are huge. You can gain a lot of money if you deal with uncertain project events in a proactive manner. The result will be that you minimise the impact of project threats and seize the opportunities that occur. This allows you to deliver your project on time, on budget and with the quality results that your project sponsor demands. Also, your team members will be much happier if they do not enter a fire fighting mode needed to repair the failures that could have been prevented.
This article gives you the ten golden rules to apply risk management successfully in your project. They are based on personal experiences of the author who has been involved in projects for over fifteen years. Also, the big pile of literature available on the subject has been condensed in this article.
Rule 1: Make Risk Management Part of Your Project
The first rule is essential to the success of project risk management. If you don't truly embed risk management in your project, you can not reap the full benefits of this approach. You can encounter a number of faulty approaches in companies. Some projects use no approach whatsoever to risk management. They are either ignorant, running their first project or they are somehow confident that no risks will occur in their project (which of course will happen). Some people blindly trust the project manager, especially if he or she looks like a battered army veteran who has been in the trenches for the last two decades. Professional companies make risk management part of their day to day operations and include it in project meetings and the training of staff.
Rule 2: Identify Risks Early in Your Project
The first step in project risk management is to identify the risks that are present in your project. This requires an open mindset that focuses on future scenarios that may occur. Two main sources exist to identify risks, people and paper. People are your team members that each brings along their personal experiences and expertise. Other people to talk to are experts outside your project that have a track record of the type of project or work you are facing. They can reveal some booby traps you will encounter or some golden opportunities that may not have crossed your mind. Interviews and team sessions (risk brainstorming) are the common methods to discover the risks people know. Paper is a different story. Projects tend to generate a significant number of (electronic) documents that contain project risks. They may not always have that name, but someone who reads carefully (between the lines) will find them. The project plan, business case and resource planning are good starters. Other categories are old project plans, your company Intranet and specialist websites.
Are you able to identify all project risks before they occur? Probably not. However if you combine a number of different identification methods, you are likely to find the vast majority. If you deal with them properly, you will have enough time left for the unexpected risks that take place.
Rule 3: Communicate About Risks
Failed projects show that project managers in such projects were frequently unaware of the big hammer that was about to hit them. The frightening finding was that frequently someone of the project organisation actually did see the hammer, but didn't inform the project manager of its existence. If you don't want this to happen in your project, you better pay attention to risk communication.
A good approach is to consistently include risk communication in the tasks you carry out. If you have a team meeting, make project risks part of the default agenda (and not the final item on the list!) This shows risks are important to the project manager and gives team members a natural moment to discuss them and report new ones.
Another important line of communication is that of the project manager and project sponsor or principal. Focus your communication efforts on the big risks here and make sure you don't surprise the boss or the customer! Also, take care that the sponsor makes decisions on the top risks because usually some of them exceed the mandate of the project manager.
Rule 4: Consider Both Threats and Opportunities
Project risks have a negative connotation: they are the bad guys that can harm your project. However, modern risk approaches also focus on positive risks, the project opportunities. These are the uncertain events that are beneficial to your project and organisation. These good guys make your project faster, better and more profitable.
Unfortunately, a lot of project teams struggle to cross the finish line, being overloaded with work that needs to be done quickly. This creates a project dynamic where only negative risks matter (if the team considers any risks at all). Make sure you create some time to deal with the opportunities in your project, even if it is only half an hour. The chances are that you will see a couple of opportunities with a high payoff