How to carry out a risk analysis in project management?

Meticulous, precise planning is essential for a successful project. A meticulous and precise planning is essential for a successful project. 

From task planning to budget forecasting, every step of the way is carefully scrutinized, so as to secure the necessary room for maneuver to adapt to unforeseen circumstances and ensure on-time delivery.

This is where the risk analysis in project management.

This component of risk management helps to identify potential threatsassess their impact and implement appropriate solutions.

This step-by-step guide will help you carry out this analysis and reveals the tools you need to be more precise - and ultimately, more proactive. and, ultimately, proactivity.

Step 1: Identify potential project risks

How do you detect a risk in a project?

Proactive risk identification begins as early as the second second phase of project management. This exercise involves thinking through and naming all the risks that may arise during the production phase phase of the assignment, and which could impact on its quality or deliverability.

There are several methods for identifying project risk upstream.

1. Brainstorming It's timeless, and for good reason! Organizing sessions with the project team ensures that no idea is left untouched.
   

   💡 You can then create a risk table to annotate all the ideas retained.

    

2. Draw up a risk register In a risk register: again based on your work history, note recurring risks, how to anticipate and circumvent them, and why not, a few use cases. This document will be invaluable to you, as well as saving time for future projects. In addition, a PMI France publication suggests ways ofusing the risk register in project management.
3. Feedback Analyze reports and other data from past projects to identify recurring risks. This will enable you to analyze how your teams dealt with the situation.
   

Everything that could affect the project needs to be identified: characteristics, causes and repercussions. In the end, it's a matter of imagining the worst to prepare for the best.

What risk analysis tools are available?

Risk management software

You can equip yourself with risk management software to carry out the analysis phase.

Stafiz is particularly popular with service companies.

Its numerous dashboards and customizable reporting help you to create different planning scenarios that identify risks in an instant.

This way, you can facilitate the implementation of corrective actions even before the project starts, such as :

• budget adjustment or revision, 
• appointment of managers,
• adjusting workloads and project schedules.

The ERP guide to service provision

Risk analysis matrices

The matrix is another tool used to organize and prioritize risks in project management.

• A visual representation

The risk management matrix provides a visual representation of the situation. Among other things, it should contain 4 key pieces of information: 

• list of all risks ;
• their source;
• their consequences ;
• their level of severity.

• An overview

The risk matrix shows the various links between potential risks. In this way, it provides a clear picture of the situation, enabling us to define an action plan to address the risk quickly.

More accessible, it allows you to visualize and apprehend risks according to certain criteria:

• the scoring matrix is used to assign scores to each risk;
• the priority matrix classifies risks according to urgency and importance;
  

SWOT prioritization matrix

• finally, the gravity matrix, also known as the criticality matrix, is a combination of the previous matrices: it evaluates probability and impact on a risk scale.

These tools provide a clear vision of priorities and actions to be taken in the event of unforeseen circumstances.

Step 2: Assess and rank project risks

The qualitative approach

This method is based on the principle of project risk matrices It is based on a descriptive risk assessment.

To create a project risk table, enter the following fields.

1. The name of the risk:  so that it can be understood by everyone.
2. Identify the type:  is it financial, technical or human?
3. Assign a severity:  on a scale of 3 to 5, depending on the degree of precision required.
4. Estimate probability:  assess the possible frequency of occurrence.

The advantages of this method

Quick and easy to set up, all you need is a physical medium or a spreadsheet. 

It adapts easily to your organizational process and the size of your assignments.

Limits of the qualitative approach to risk analysis

While this method helps to give an overall idea of the risks involved, it remains particularly subjective.

It is based on assumptions with no concrete data to support or validate them.

It requires experience and a certain level of expertise which, in its absence, can lead to an unrealistic analysis. unrealistic analysis.

It is therefore less suitable for small structures or large-scale projects.

The quantitative approach

Unlike the qualitative approach, this method uses numerical data to assess risks.

There are two methods for performing a quantitative risk analysis.

1. Monte Carlo analysis: This is an algorithm that simulates different scenarios in order to estimate the potential financial and other impacts on a project.
2. Expected Monetary Value : This calculation associates each risk with a potential cost. To do this, multiply the probability of a risk as a percentage by the financial impact (profit or loss).

The advantages of this method

Relying on high-performance algorithms, the quantitative approach makes it possible to concretely materialize the impact of a project risk with greater reliability.

This precision then enables effective corrective measures to be taken, particularly in the  resource allocation on the project schedule.

The limits of the quantitative approach to risk analysis

In order to quantify the impact of all the scenarios identified, it's not long before we have to invest in the resources needed to carry out the necessary calculations, the complexity of which often requires the use of tools.

The Stafiz scenario builder is the missing tool in your project risk analysis!

It simulates different resource allocation possibilities, taking into account : 

• the tasks to be performed ;
• qualified employees to carry them out.

Select all the qualified resources available to feed the field of possibilities.

Stafiz then analyzes the different scenarios, so as to optimize your margin, load distribution and resource planning rate over the next 3 and 6 months!

Once you've identified the best scenario, you can transform the simulation into real planning, enabling you to plan your projects quickly and with greater security!

Step 3: Anticipate solutions to risks

In project risk management, anticipation is a step in its own right.

Indeed, the risk mitigation is a key step in reduce the likelihood of an identified risk.

It also makes it possible, by preparing a plethora of options in advance, to minimize the impact of a risk through faster response.

Here are a few strategies to adopt in your risk mitigation:

• prevention:  this involves taking action to prevent the risk from occurring;
• draw up a contingency plan:  preparing alternative solutions can help reduce the impact;
• transfering risk: transferring risk to a third party by means of insurance contracts or external services is another strategy worth considering.

Proactively anticipating solutions increases the chances of project success and reduces the unexpected!

Step 4: Analyze risks during the project

As we saw earlier, risk analysis is most often carried out during the project planning phase.

However, risks can evolve, take on a new form, or new ones can simply be added.

It is therefore necessary to analyze potential threats to the project throughout its life cycle.

How do you set up a risk monitoring system?

As with conventional classic project monitoringrisk monitoring can take different forms:

• the dashboard centralizes key information in a visual tool;
• regular reviews through periodic meetings are useful for adjusting risk management strategies;
• the updating matrices is essential to re-calibrate risk assessments as projects evolve.

What are the key risk indicators?

To ensure effective risk monitoring and keep control of your projects, it is essential to monitor certain KPIs such as : 

• probability of occurrence  to assess changes in risk probability;
• risk impacts to track changes in impact ;
• risk exposure which combines impact and probability;
• reaction time  to measure the time between the identification of a risk and the implementation of a solution;
• Mitigation rate to assess the effectiveness of corrective actions.

Risk analysis is a powerful lever for secure the success of your projects. By following these four steps - identification, assessment, anticipation and follow-up - you maximize your chances of mastering the unexpected.

Adopt a proactive approach and equip yourself with the right indicators to adjust your plans in real time!