A simple primer on risk management for the first-time manager
First, I'll level-set - what is a risk? It is the probability that an event will occur and have a negative impact on a project. In other words, risks are potential problems that could arise in the future.
While we can never predict the future with 100% accuracy, risk management, when planning, helps us to identify and assess risks and then put plans in place to mitigate them. And the fun fact is that you don't have to be a certified project manager to do this! So, what can risk management look like in practice? And why is it important?
Why risk management (in quotes):
Plans are useless, but planning is indispensable. - often attributed to Dwight D. Eisenhower.
As a project manager who lives by project plans and a recovering perfectionist who still needs things to go according to schedule, I find it blasphemous to give credit to this saying. So, perhaps I'll only grant it 80% truth - plans aren't always useless; things can sometimes move without difficulty.
However, like Mike Tyson once said - everyone has a plan until they get punched in the face. Real life is complicated, and from time to time, we will (metaphorically, I hope) get punched in the face and see our plans fall to the ground before us. So I'm not saying you should ditch your project plans; it's true when they say that failure to plan is planning to fail. What you do need to include in your planning is an accommodation for considering what may go wrong and how you intend to respond if they do. Risk management is that simple!
How to: risk management:
When most people think about risk management, they tend to think of it as this daunting, complicated process that is only for "serious" projects. This is not completely true. It's not just for "serious" or complex projects; simple plans also need to include considerations for risk, especially for the reasons outlined above. Also, risk management isn't complex, it can be done using a simple 3-step process.
The first step is to identify risks. This can be done by brainstorming with your team or stakeholders. You can also look at previous project plans to get an idea of what might have gone wrong and caused a delay or issue.
The second step is to assess the risks. This is where you evaluate how likely it is that the risk will occur and what impact it will have on the project if it does.
The third step is to put plans in place to mitigate the risks. This is where you decide how to respond if the risk occurs.
And that's it! A simple 3-step process that can be used for any project, no matter how big or small. Now that you know a bit about risk management let's look at some specific examples of risks you might encounter in your work.
Types of risks:
There are four main types of risks that you might encounter:
Schedule risks - these are risks that could impact the timeline of your project. For example, if you're working on a website redesign and you're relying on getting feedback from users, a delay in receiving that feedback could push back your launch date.
Cost risks - these are risks that could impact the budget of your project. For example, if you're working on a marketing campaign and you need to print materials, a sudden increase in the price of printing could impact your budget.
Technical risks - these are risks that could impact the technical aspects of your project. For example, if you're working on a software development project and you're relying on an API, an outage of that API could impact your project.
Organizational risks - these are risks that are beyond your control and could impact the organization as a whole. For example, if you're working on a project for a client and they suddenly go out of business, that would be an organizational risk.
Of course, this is not an exhaustive list of risks, but it should give you an idea of the types of risks that you might encounter in your work.
How to deal with risks:
There are four main ways to deal with risks:
Avoidance - this is when you try to avoid the risk altogether.
For example, if you're working on a project and you identify a risk that could impact the timeline, you might try to avoid that risk by breaking the project down into smaller steps so that you can get feedback along the way and make adjustments as needed.
Mitigation - this is when you try to reduce the impact of the risk if it does occur.
For example, if you're working on a project and you identify a risk that could impact the budget, you might try to mitigate that risk by getting quotes from multiple vendors so that you can compare prices and make sure you're getting the best deal.
Acceptance - this is when you accept that the risk might occur and plan for it accordingly.
For example, if you're working on a project and you identify a risk that could impact the timeline, you might accept that risk by adding extra time into your project plan to accommodate any delays.
Transfer - this is when you transfer the risk to another party.
For example, if you're working on a project and you identify a risk that could impact the budget, you might transfer that risk to your client by including a clause in your contract that states they will be responsible for any cost overruns.
Of course, there is no one-size-fits-all solution for dealing with risks, and you'll need to evaluate each risk on a case-by-case basis to determine the best course of action. Risk management is an important part of any project, and by following these simple steps you can ensure that your project is well-protected against any potential risks.
Finally, since you're not a fortune teller, capturing every variation of your plan in your risk mitigation strategy is impossible. So at some point, you'll simply have to trust your instincts, make a decision, and move forward. The goal is to make sure that you're as prepared as possible for whatever comes your way. You can continue to work on your resilience - how well do you bounce back when things happen that you did not see coming? And what resources - both human and material - can help you bounce back too?
Projects are never risk-free, but by being aware of the risks involved and taking steps to mitigate them, you can increase your project's chances of success.
