Risk Management: The What and the How

Whenever starting a new venture, or embarking on a new project, the risk is an inherent part of the process. A seemingly gentle tread into unknown waters, can be fraught with uncertainties and often contains probabilities of unforeseen situations and events taking place- aka risks.

So, it becomes the job of project managers to exercise due diligence, build on the wisdom they carry or rely on others to analyze the risks involved with any project. They are accountable to come up with ways to mitigate risks or have action plans should some of these fructify.

A project manager should always start their risk management planning process with the question – What can go wrong in this project?

Megacorporations or small-entrepreneurs, all work with risks in their projects. Therefore, risk management is a key area of focus within any organization. To work towards planning for an unknown risk variable, every business needs to have a comprehensive risk management strategy.

In this blog, you will learn 

What is Risk?

In simple terms, Risk is anything that has a possibility of having a negative impact on a project, a process, a program, an individual, or an organization. The implications of risk having negative consequences is usually quantifiable but can also be in terms of intangibles.

In a project context, risk often refers to business and financial risk. It can arise from a number of underlying dynamics

Therefore, Business Risk stems from the idea that there is no way of ascertaining the gains and losses incurred in a business due to the existence of unforeseeable circumstances and possible issues in the workflows. ISO 31000 defines risk as “an effect of uncertainty on objectives”, i.e. the effects of risks in business can be both positive or negative, depending on how they affect the outcome or the set objectives of an organization. This uncertainty, however, propels the requirement for a comprehensive risk management strategy, one that can analyze, mitigate or deal with both the positive and negative outcomes of risks within a project or larger business.

What is Risk Management?

Risk management is the identification, evaluation, and prioritization of risks in a project or business, followed by a response to risks cropping up in the process, to keep the project on track and moving towards its objectives. 

However, risk management does not involve merely reacting to instances of risks as they crop up in the process. Effective risk management works at the level of planning and mitigation, to predict some of the foreseeable risks, as well as have contingency plans for risks that are hard to predict.

4 Risk Management Responses

Within Risk Management, there tend to be four major risk responses in which the identified risk is dealt with. Once you understand these responses, a risk management plan can be created for your projects and businesses.

How to Create a Risk Management Plan?

According to ISO 31000, there are three broad categories of creating and implementing a risk management plan. Under each category is a systematic elaboration on the process of creating a risk management plan that is effective and comprehensive.

Context Establishment

In many situations, project managers jump straight into the identification of risks, without articulating their own specific contexts within which they function. Context and background make a huge difference in the overall creation of your risk management plan, as it is then tailored to the actual project and not just an amalgamation of popular and standardized risk management strategies within an industry.

Establishing the context involves – 

Identification of Risks

The next step in the process of creating a risk management plan is to identify the risks involved in the project. Risk identification usually functions at two levels – source or problem. 

Once risks have been identified and categorized between the two potential levels of existence, the next step is to further break down the process of identification through specific and pointed lenses of evaluation, especially in terms of their impact on the project as a whole. As such, there are five categories within which risks can be identified.

Risk Assessment

Risk assessment is the combined effort of two larger ideas and methods of analysis- 

What this means is that, once risks have been identified they need to be measured for their severity of impact on the functioning of a project and its trajectory towards fulfillment. Prioritization becomes key in the implementation of a risk management plan, as the sequence of events and educated responses to risks is the best way to handle negative or positive outcomes associated with risks in a project.

Raid Project Management

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Risk Management Dashboard

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Risk Assessment PowerPoint

Source: Risk Assessment PowerPoint by SlideUpLift

Using project management software, risk analysis methodologies, and statistical information, the assessment, and analysis of risks can be undertaken by a project manager. However, no method is perfect, and it is best to be flexible and be ready to improvise should an unforeseen situation occur that needs an immediate response.

Risk Mitigation

Once risks have been assessed, appropriate controls and measures need to be adopted to mitigate each risk identified. Risk mitigation often involves multiple levels of authority, dispensing on the type of risk. For instance, a known computer virus risk needs to be mitigated with the approval and authority of the IT department.

Risk Mitigation Plan Template

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Risk Mitigation Template

Source: Risk Mitigation Template by SlideUpLift

Crisis Change Management Template

Source: Crisis Change Management Template by SlideUpLift

A method adopted by strategists to mitigate risks is called the Risk Treatment Plan. It becomes a working document consisting of each identified risk, selection of security controls, and the standards that define those controls. It effectively outlines how each risk is to be managed and mitigated, using specific and focused directives. Also, learn the best framework for handling crisis management. 

SlideUpLift Presentation Templates for Presenting Risk Management Strategy

Presentation templates are pre-made and expertly crafted PowerPoint slides that contain all the formats and headings needed to present your own Risk Management Strategy. Each template is visually engaging and comprehensive to make the process of creating and presenting your strategy easier, smoother, and better. You can browse through SlideUpLift’s vast collection of fully editable and creative presentation templates that can save you a lot of time in order to create slides that are professional, clean, and can effectively communicate your ideas.

Heat Maps Template

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Context Setting For Risk Management

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Bowtie Template

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Free Mitigation Plan Template

Source: Free Mitigation Plan Template by SlideUpLift

COVID has been the biggest risk in recent times which has forced us to rethink our entire risk planning. Check out how to showcase the impact, risk, and next steps as a response to COVID risk.

COVID-19 Business Impact Presentation

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Conclusion

Every project, whether it’s big or small, needs to engage in the process of risk management. And risks do not come in the same shape or form each time. And so, having knowledge of the various ways in which risk management strategies can be created and implemented is essential for the smooth functioning of your project, all the while minimizing negative effects and benefiting from the positive outcomes of risks. So, go ahead and take risks. After all, no successes were ever gained without a little bit of risk involved.