Risk management: an essential skill for project managers
As a project manager, you are responsible for successfully completing a project within a specified time, budget and quality. But how do you deal with the uncertainties and challenges you encounter along the way? How do you ensure that you identify, analyze and manage the risks that may threaten your project in a timely manner?
Risk management is an ongoing process that helps deal with risks in a proactive and structured manner. Risks are uncertain events with potential impacts on project objectives, which can be either positive or negative. By applying risk management, you can increase the likelihood of achieving your objectives and reduce the negative impact of risks.
Risk management consists of six steps:
- Establish objective: This is the first step in which you determine what you want to achieve with a project and what the prerequisites and expectations are. You can formulate the objective SMART: specific, measurable, acceptable, realistic and time-bound. You can also determine risk appetite: the degree to which you are willing to take risks to achieve the objectives.
- Identify risks: This is the step in which you identify all possible risks that could affect your project. You can use various sources for this, such as historical data, market research, brainstorming sessions, interviews or checklists. You can also distinguish between internal and external risks, and between positive and negative risks.
- Assess Consequences: This is the step in which you estimate the probability of occurrence and potential impact of each risk. You can do this quantitatively or qualitatively, depending on the information available and the complexity of the risk.
- Assess risks: This is the step in which you determine the priority and importance of each risk. To do this, use a risk matrix that combines the probability and impact of each risk. You can also set a threshold to determine which risks are acceptable and which are not.
- Managing risk: This is the step in which you decide what actions you will take to influence the risks. There are four strategies to choose from: avoid (eliminate the risk), reduce (reduce the risk), transfer (share or outsource the risk) or accept (tolerate the risk). You can also exploit opportunities by exploiting (increase the positive impact), sharing (spread the positive impact), improving (increase the opportunity) or accepting (welcome the positive impact).
- Monitoring: This is the final step in which you monitor the progress of your project and the status of the risks. You can use different tools for this, such as dashboards, reports, audits or evaluations
