Risk Management is often overlooked on projects. But it is very important to consider risks before you start any project. You may not be a project manager but everyone is part of a project, even if the project is fixing a broken screen door or cooking a Thanksgiving meal. All jobs involved projects. Do you write reports? Researching, composing, editing, revising, and proofreading are all steps in the project to create the report. Do you work at a retail store and need to do inventory? The process of counting, reporting, and ordering is project. Even the stay-at-home mother who is planning a birthday party for her daughter or the couple planning a wedding is managing a project.
As you probably have experienced, some projects go well, some go bad, and some are never completed. This is because every project has some risk involved. There is some reason in every project, no matter how unlikely, that something will go wrong. For example, if you are writing a report on your computer and the network goes down, you may not be able to meet the deadline. If you are doing inventory and there is a power outage, you won't be able to complete it on that day. If you have reserved a hotel for the wedding reception, and suddenly the hotel goes out of business, you have a big problem. Some of these risks can be anticipated and measures can be put into place so that the event (such as a power outage) will have the least effect possible on your project. This is risk management.
One common factor in most projects is people. Even if the project has only one person on it, there is a possibility that person may leave the project. You need to have a plan on what to do if this occurs. John works with you on an important project. One day his wife calls the office and says he went into the hospital with appendicitis and will be out for at least six weeks. You need to replace him fast. Elena is supposed to do inventory over the weekend but she calls in sick. Jamie comes into the office, tells you she won the lottery, picks up her stuff, and walks out. All of these will affect your project. In order to minimize the effect, at the start of a project you will want to plan for the possibility of a problem.
There are several ways to handle risk. The four main ways are acceptance, avoidance, transference, and mitigation. Acceptance is the realization of the risk and just taking the chance it won't happen. There could be a power outage and you just accept that it may happen (and hope it won't). For the wedding, there is a risk that the florist won't deliver the flowers on time. If this happens, the wedding goes on without flowers.
Avoidance is simple: do what you can to avoid the problem. You can avoid having less than four people to do the inventory by scheduling five people to do it. Of course paying an extra person will affect that budget. If you are worried about non-delivery of fresh flowers, use silk ones. The mother planning the birthday party isn't sure she can handle twelve kids. So she only invites nine. These are all ways to avoid the risk.
Transference is when you transfer some or all of the risk to a third party. The most common form of transference is insurance. If you are planning a carnival but would have to cancel if it rains, you can buy insurance that will pay your expenses if it rains. If you are unsure of the florist for the wedding, hire two florists, each providing half the flowers. That way if one doesn't show up, at least you have flowers from the other one.
Mitigation is what you do so a risk event, should it occur, will have the least impact on the project. If you want to mitigate the risk of less than four people on the inventory project, and don't want to go over budget, you might have someone on call. If one of the people doing the inventory can't make it at the last minute, you can phone the on-call person as a replacement. For a possible power outage, you can have a back-up generator or battery powered lamps and pre-charged laptops available. In the case of losing a team member, you could have someone already trained to take over. You may also be able to pull someone off a less critical project (having made those arrangements when the project began).
How important it is to have a mitigation plan depends on two things: how likely the event will happen and how much effect it will have on the project should it occur. If something has a low likeliness and a low effect (florist delivers the wrong color flowers) you may not bother to prepare for it. But if something has a high chance of occurring and a high impact on the project (70 year old team leader decides to retire), then you want to have a plan in place.
Risk management is creating a list of possible risks, deciding their impact and chance of occurrence, how you plan to handle it (acceptance, avoidance, transference, or mitigation) and how that plan will work (how will you avoid it or how can you mitigate its effect). Here is an example of a risk management plan (most people create it in an Excel spreadsheet or a Word table):
- Risk: Outdoor wedding in June rained out
- Impact: High
- Change of occurrence: Medium
- Way to handle: Mitigation
- Plan: Reserve a room at the community center to use in case of rain
- Risk: Groom backs out
- Impact: Very High
- Change of occurrence: Very Low
- Way to handle: Acceptance
- Plan: Call off the wedding.
By having a risk management plan, you will find that when disaster strikes, you are much better prepared for handling it.
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