Planning and Managing Risk in Technical Project Management
Risk Analysis and Management is a crucial practice for project management to ensure that fewer surprises are encountered. Although it is not easy to predict the future with certainty, there is a simple and straight process for managing risks to predict the uncertainties that may be met in the project’s course. This procedure helps to minimize the occurrence and the effects of these uncertainties and improve the chance of succeeding in completing the project as well as reducing the consequences of these risks.
A risk is any uncertain occurrence or condition that has the likelihood of affecting your project. Although not all chances are negative, they sometimes are opportunities, but their approach is just like that of adverse risk. Any project has no guarantee, and any slight change of activity or factor can cause a problem with severe consequences or alter the project’s outcome. Therefore, it is very important to plan for potential risks and how to mitigate them in case they happen to occur. Planning for the management of risk is a process that involves assessment and mitigation strategies for the risks.
Risk Identification and Evaluation
Risk assessment is the process that involves identifying potential risks and evaluating the possible effects of the risk. Risk identification is a creative and disciplined process that utilizes checklists of potential risks and determines the likelihood of these occurrences on the project. The inventory is developed based on past project experiences. The index is also useful to the project manager and the project team to identify the particular risks and expand the team’s thoughts. The project team’s experience, project experience within the company, and the field experts are very useful in identifying potential risk on a project.
Another method to explore potential risk on a project is identifying sources of danger by category. Such categories include cost, schedule, client, technical, finance, political, environmental, and contractual. A work breakdown structure can be used to develop a risk breakdown structure. The risk breakdown structure arranges the risks identified into categories by tabulating the increased levels of details to the right. The category for people can be subdivided into various types of risks related to people. Such risks associated with people are risks of not getting people with the right skills required to undertake the project.
After identifying the potential risk, the project team then evaluates each risk basing on the probability of that risk occurring and the likelihood of the risk causing losses. Not are risks have equal probabilities of occurring; some are more likely to occur than others, and each risk’s consequences vary greatly. The next process that follows after identifying the risk is evaluating the probability of occurrence and the loss’s intensity; the risks can cost the project.
Developing criteria to ascertain high-impact risks can reduce the focus on a few crucial risks that require mitigation. For Example, suppose a high-impact risk could increase the budget by 5% or 2% of the detailed budget. Only a few potential risk events meet these criteria. In developing the management plan, the project team should focus on such potential risk events. Evaluation of risk includes developing an understanding of the kinds of potential risks that have the greatest chance of occurring and those that could cause the biggest negative consequence on the project.
The complexity and the risks of a project positively correlate, whereby they both increase or decrease together. A project that contains new and emerging technology will contain high ratings of complexity and corresponding high risks. A lot of resources would be demanded by the project to meet its objective. The project management team would be forced to assign more resources to the technology managers to meet the project’s objectives. An increase in the complexity would demand more resources to meet the targets typically, and each of the resources comes with unprecedented problems.
Risk evaluation is done in the workshop setting. Based on the identification analysis of each risk is done to determine the probability of occurrence and the possible loss incurred if it does occur. The ratings of both the impact and the likelihood of occurrence are rated as high, medium, and low. The mitigation plan of the risks addresses the highly-rated items on both the impact and the likelihood. It is not all project managers who do a formal risk assessment on projects. This is because many do not understand the tools and the benefits of a structured analysis of project risks. Failure to create a formal risk management tool creates barriers to the implementation of a risk management plant.
Furthermore, the project manager’s personality and management style matter in the levels of preparation for managing risks. Some managers are proactive and create detailed risk management plans for their projects. Other managers are reactive and are confident in handling unprecedented events, while others are risk-averse and choose not to be optimistic and not evade taking risks whenever possible. For projects with low complexity profiles, the team manager can track items informally considered to be risky. More complex projects require the project manager to develop a detailed list of items thought to be riskier and track them while reviewing the project. When the project of greater complexity, evaluating risks require a series of meetings to assess the risks during the various phases of development; in this occasion, an external expert may be hired for the process of risk assessment, and the risks assessment plan would be considered prominently in the project implementation plan. On more complex projects, statistical models may be utilized to evaluate the risk since there are many varied possible combinations of risks to be calculated one at a time.
Risk Mitigation
After the identification and evaluation of risk, the project team creates a mitigation plan for the risks. A mitigation plan is a strategy employed to reduce the impact of an unprecedented event. Mitigation plan takes various ways, including risk avoidance, risk sharing, risk reduction, and risk transfer. Each of these tools is effective in decreasing the individual risks and the risk profile of the project. The developed risk mitigation plan should entail the mitigation approaches for every risk event identified. The corresponding action the project management team will undertake to decrease or do away with the risk.
Risk avoidance
This involves creating an alternative strategy with a high success probability but at a higher cost to accomplish the project task. The most common and effective way to avoid risk is to use proven technologies rather than adopting new technology with promising success rates and unknown risks associated with it. The project team should choose a re-known vendor with a good track record to deliver the materials rather than choosing a new vendor with promising incentives with no track record. In so doing, you evade the risk of working with new vendors. Conducting drug tests on the project team would reduce the risk incurred by teammates working under the influence of drugs.
Risk Sharing
Risk-sharing involving working with others as partners to share the responsibilities for the risky events. Partnering with other companies is beneficial because the other company may have the necessary expertise and experience to manage the project in which your team may be lacking. In case of risky event occurs, the partner may absorb some or all of the event’s negative consequences. If the project becomes successful, the partnering company will also gain some benefits from the project.
Risk reduction
Risk reduction involves investing funds to reduce the risk of the project. The project manager may hire an expert to conduct a review of the technical plans or assess the project’s cost estimate to improve confidence in the strategy and decrease project risk. It also involves assigning highly skilled project personnel to manage the activities with a high potential of risks. When an expert is in charge of the high-risk activity, he can predict a problem and seek a solution to mitigate the situation, thus preventing the project from adversities. For Example, if the company is working on international projects, the management may purchase the currency rate guarantee to guard on the risk of fluctuation of currency rates. Also, forbidding key executives and experts from traveling together reduces risks.
Risk transfer
Risk transfer involves shifting the risk from the project to another party. It may involve purchasing insurance for key items of the project, thus transferring the project’s risk to the insurance company. Purchasing insurance is done on the areas out of control of the project management team, such as weather, political unrest, and labor strikes. These events have a significant effect on the project but cannot be controlled by the project team.
Planning and managing risk in Technical Project management also involves the development of a contingency plan. A contingency plan is an alternative method for accomplishing the project’s goals after the potential risky event has been identified and poses a threat to the success of the project. For Example, a contingency plan may be to use a train to transport crucial materials if truck drivers go on strike. If a piece of important equipment arrives late, the mitigation may be to adjust the schedule to accommodate the equipment’s late delivery. Contingency funds should be set aside based on the risk level of the project.
To conclude, Planning and managing risk in Technical Project management is a crucial necessity for accomplishing the project. It includes risk identification, analysis, and mitigation. It also provides for the development of a contingency plan with the allocation of contingency funds. These strategies aim to evade, reduce, and manage the impacts of risky occurrences from affecting the project.