In a project, it is rare that everything goes exactly as planned.
Delays, changes in management, strategy and unforeseen events... There are many characteristics that can impact a project.
It is for this reason that risk management in project management should not be taken lightly. Indeed, it is crucial if the project is not to be endangered.
Although we have chosen to deal with risk management in project management, note that it must also be considered at the global level of the company.
In this article, we'll try to define risk management and understand why it's essential. We will then review the main risks, their consequences and solutions before understanding how to implement an effective risk management strategy.
Risk management: definition
Risk management is the process of identifying, anticipating, and correcting any event that could have a negative impact on the project.
It involves detecting and analysing any potential threat to the project, in order to limit its impact.
It must be considered from the beginning of the project, from the preparation phase to delivery and extends throughout the project.
A proactive approach
Risk management is considered a proactive approach. Indeed, it is a question of favouring anticipation over reaction.
When a risk is proven, it is more about problem solving than risk management.
Why implement risk management?
Effective risk management is essential.
No project is immune to the unexpected. Thus, imagining all the eventualities that could endanger him is an important part of the preparation.
Anticipating to better react
Implement preventive measures
Risk management allows an essential element in project management: anticipation.
Indeed, this approach involves providing solutions to situations that have not yet occurred.
In addition, it encourages the implementation of preventive measures so that the risk does not become a reality.
Avoid impulsive decision-making
If, despite all your efforts, the risk becomes a reality, then you have the whole plan of action to get back in the right direction.
The earlier you anticipate situations, the more room you have to act in a reasoned and logical way.
Risk management helps avoid impulsivity and hasty decision-making.
Improve planning
Gain in accuracy
Carefully implemented risk management will allow you to be more precise in the preparation of your project.
Listing all the potential problems, finding solutions to them, and even before they occur, will facilitate the progress of your project.
Adjust according to context
Have you identified a risk of an increase in the price of raw materials due to a war in one of the producing countries?
You could then anticipate now and adjust the quantity ordered in advance, or take the time to look for other potential producers.
Risk management therefore involves implementing prevention strategies to limit the impact on your project.
What are the potential risks of a project?
Problems can arise at any point in the project and affect various aspects.
Here are the different types of risks you may encounter in project management.
The 4 main types of risks in project management
Temporal risks
Time risks mainly concern timing, and in particular schedule management.
Examples of temporal risks
Poor timeline evaluation or too short a project time are common time risks in project management.
The consequences of temporal risks
These risks can have significant consequences on the project: a delay in deliverables, an overall overrun of the project, customer dissatisfaction or frustration among the teams.
How to avoid time risks in a project
To avoid time risks, take the time to interview project stakeholders to ensure that your estimates are realistic.
And consider a margin!
Financial risks
Financial risks concern everything related to the budget of a project.
Examples of financial risks
It can be a poor evaluation of the budget, an increase in the price of raw materials or human resources.
The consequences of financial risks
Financial risks can lead to the need to find other means of financing or to encroach on the budget of other company projects.
To avoid financial risks, you will need to gather as much information as possible in order to be very precise in your estimates.
Ask your teams, base yourself on the history, keep an eye out for news. And, again, consider a margin.
Technical risks
The so-called "technical" risks can be varied.
Examples of technical risks
For example, it can be a lack of tools, technical means or an incompatibility between tools.
The consequences of technical risks
The technical risks will require us to look at alternatives. This process is generally expensive and requires time to reflect and the mobilization of teams.
This can then put the budget at risk, but also the schedule.
Conclusion: it is better to anticipate these subjects before they become problems.
How to avoid a technical risk in project management
To avoid technical risks, list your needs at the beginning of the project and make sure that your current resources allow you to meet them.
Regular monitoring of the tools in your sector can also help you protect yourself against technical risks.
Forget Excel, choose a complete tool to manage your projects!
Stafiz helps you anticipate risks. Predictive KPIs tell you about future deviations before they happen. This allows you to make decisions to correct the trend.
Legal risks can have a heavy impact on your project.
Examples of regulatory risks
The obligation to comply with the GDPR or the modification of a law requires adjustments that are impossible to circumvent.
The consequences of legal risks
The risks involved are non-compliance.
This can lead to any kind of consequences such as financial penalties or a damaged reputation.
How to avoid legal risks
To avoid legal risks, make sure to actively monitor the new laws in force, especially those specific to your sector.
Being accompanied by dedicated and qualified professionals can also be a relevant option.
Other types of project risks
Operational risks
For example: cyberattacks, data hacking, fraud...
In these cases, a proactive approach remains the best way to protect yourself against this type of risk.
Regularly ensure that your systems are up-to-date and optimized.
Environmental risks
Pandemics, or any other weather event, can cause the project to come to an abrupt halt.
Make sure your data is properly stored and accessible, even remotely.
Human risks
Sudden departures of employees (change of company, burn-out, death) can impact the progress of the project, or even require the recruitment of replacements.
The risks inherent in the project
For example: unattainable goals, poor communication, or human error.
The risks can therefore be of various kinds. Unfortunately, they can accumulate and cause a snowball effect.
A legal risk can generate a temporal risk, which triggers a financial risk. It is therefore essential to treat a risk when it occurs.
What are the steps of risk management in project management?
Example of a project risk management plan
Identify the different roles
In risk management, identifying the role of each stakeholder is essential.
Thus, this first step consists of identifying the individuals whose impact is significant for the project.
The aim is to clarify who is responsible for what in order toavoid ambiguity and to hold everyone accountable.
In a project, risk management is usually assigned to the project manager.
On the other hand, other stakeholders must remain alert, whether it is the project sponsor, the steering committee or the operational team directly.
Conduct a risk analysis
Risk management is a collective problem. As a result, it is not uncommon for this exercise to take the form of brainstorming, to generate ideas but also to involve the teams.
We encourage you to reach out to your collaborators, whether they are those working directly on the project or others, who may have been confronted with similar project contexts.
Years of experience in the field can be valuable sources of information.
To find out how to perform a reliable and comprehensive risk analysis, follow our guide!
💡 To find out how to perform a reliable and comprehensive risk analysis, follow our guide!
Preparing solutions means having a detailed action plan. This must specify:
who is responsible;
what is he responsible for;
how will he deal with the problem;
when?
Choose a strategy
In risk management, there are 4 main strategies when faced with risk.
Accept: the risk exists, you accept its presence. In this case, it is advisable to anticipate solutions in order to be ready, whatever happens.
Reduce: You define an action plan to reduce the likelihood of the risk occurring, while trying to minimize its impact.
Transfer: You try to transfer the risk to a third party: another team, another project... However, this solution is not applicable to all types of risks. Moreover, the latter is not eliminated, you only shift the responsibility.
Avoid or eliminate: Through thorough analysis and investigation, you seek to remove the source of the risk. However, note that not all risks can be eliminated. Indeed, at your level, it can be difficult to have an impact on the increase in the price of raw materials or on the appearance of a global pandemic.
What tools and methods should be used for effective risk management?
Use a risk table
The risk matrix or matrix is an essential tool for effective risk management.
Also known as a risk management plan, this table or diagram is a reference throughout the project lifecycle.
Make a risk register
The risk register complements the risk matrix: it allows risk monitoring.
Thus, it lists all the risks, whether they have occurred and what the consequences have been.
The risk register must be kept up to date because it will serve as a reference throughout the project, and even on other projects. Indeed, it offers a detailed view of the risks and can help project managers in their decision-making.
Risk management tool
Several project management tools offer features to set up risk management.
This is particularly the case for Stafiz. The all-in-one project management platform has been designed with the specific needs of project managers in mind. Thus, it offers adapted tools such as the creation of scenarios or calculations updated in real time.
Risk management is an essential step in project management. This exercise allows you to take a proactive approach by anticipating potential problems.
Tools such as risk management matrices, accompanied by software such as Stafiz, will be able to help project managers set up effective risk management.
By training yourself in risk management, you help maximize the chances of success of your project. In addition, you help limit anxiety within your team and boost your productivity.
Questions:
Involve stakeholders: Ensure regular communication with the team and stakeholders to quickly identify emerging risks.
Implement proactive planning: Prepare mitigation plans for critical risks before they occur.
Prioritise risks: Focus on high-impact, high-probability risks.
Automate and standardize: Use risk management tools to centralize data and track actions in real-time.
Train the teams: Strengthen the risk management culture with specific training.
Continuously monitor: Set up regular checkpoints to identify discrepancies and adjust your plans.
The criticality threshold in risk management is determined by assessing the impact and probability of the risks, and then ranking them in a matrix to visualize their criticality. With the stakeholders, an acceptability threshold is set according to the priorities and risk tolerance of the project. This threshold, aligned with the challenges of the project, must be reviewed regularly to adapt to changes and new risks.
