A Practical Approach to Project Risk

In today’s fast-paced business environment, organisations face a multitude of challenges and opportunities that require them to continuously improve their processes and grow their business. To achieve these goals, most organisations will undertake various projects, working groups, and portfolios that focus on different aspects of the business. These initiatives may include anything from developing new products & services to streamlining internal operations, improving customer experiences, opening new sites, or exploring new markets. By prioritising and managing these various projects, organisations can achieve their strategic objectives, stay ahead of the competition, and drive growth and innovation.

Successfully managing these complex projects & portfolios can be a challenging task that requires careful planning, coordination, and collaboration across different departments & stakeholders. In addition, each project carries its own set of risks that could potentially impact project outcomes, such as budget overruns, missed deadlines, and poor-quality deliverables. Risks can arise from a variety of sources such as changes in project requirements, uncertainties in the market or regulatory environment, or the failure to secure required resources or funding. To mitigate these risks, organisations must implement robust project risk management processes that allow them to identify, assess, and manage potential risks.

In this blog we will explain how to:

• Identify & assess project risk using best practice processes.
• Develop risk response strategies to avoid, mitigate, transfer, or accept the risk.
• Monitor and control risks & dependencies throughout the project lifecycle.

Mapping out your Project

Effective project risk management involves developing risk response strategies, monitoring risks throughout the project’s lifecycle, and taking corrective action as needed. But before this can be done you must plan out each project and map out the relevant details to understand where risk is likely to occur.

Mapping out projects using manual methods and spreadsheets can be time consuming and does not allow for a collaborative approach. Organisations that undertake multiple projects use best-practice project management platforms to plan their projects. These platforms allow businesses to map out each project individually and prioritise projects – empowering leaders to decide which critical projects should be allocated the most budget & resources.

Before entering any information into a project management platform, it’s important to define the project scope. This involves identifying the project objectives, deliverables, timelines, and budget. Once the scope is agreed the team leaders can begin to plan out the project in the tool. Large scale projects are usually broken down into smaller programmes, projects, tasks, and actions – and allocated to stakeholders across the business for completion.

Predefined fields will ensure all the relevant details about the project are captured including, timelines, budget, key deliverables, tasks, actions, KPI’s, critical deadlines, equipment, materials, and any dependencies. In addition, any potential ‘risks’ that could impact the delivery of the project should also be captured.

At this point the automated project plan kicks into action. As the relevant stakeholders’ complete tasks & actions, automated workflows are triggered to send a notification to team members enabling the project to move to the next stage. Similarly, when a team member misses a deadline, an automated workflow could be triggered to send a reminder or escalate the issue to the project manager. Automated workflows can also be used to manage approvals & change requests, manage project budgets & expenses, and to automate reporting and analysis. By automating routine tasks & processes, project management tools can help teams save time and focus on more strategic activities.

As the project progresses and tasks are completed and spend is logged, built in dashboards & reports will enable leaders to view a live project status and drill down into any missed deadlines or anomalies.

But, what about project risk?
 

Risks can come from a variety of sources, including changes in project requirements, unforeseen events, and external factors such as changes in the market or regulatory environment. It’s essential to assess each risk in terms of its likelihood and potential impact on the project – remember, taking some risks could have a positive impact on the project.

Whether you are managing projects manually or using a project management tool, the first step in managing the risks associated with each project is to identify and assess potential risks. This involves conducting thorough risk assessments that consider all aspects of the project, including scope, budget, schedule, and any dependencies.

Managing ‘project risk’ manually using spreadsheets can be challenging as they lack standardisation & consistency and are unable to centralise the results. This can cause delays and produce inaccurate reporting, which can impact project timelines & budgets. Additionally, spreadsheets do not have the necessary features to support risk management practices, such as automated risk assessments, risk mapping, or real-time monitoring. As a result, managing project risk manually using spreadsheets can be time-consuming, error-prone, and may not provide the level of insight and control required to effectively manage project risk.

Many organisations opt to use project management platforms with built in risk management capabilities to ensure effective project risk management. This enables them to roll out risk assessments, questionnaires, and surveys online – with all results feeding directly into the tool building a complete overview of project risk.  

Some project management platforms will enable you to pull in data from other sources into the project management tool via API’s – enabling organisations to set Key Risk Indicators (KRI’s) based on live transactional & operational data – facilitating them to monitor risk on an ongoing basis and set control to flag problems.

Once risks have been identified, assessed, and rated, the next step is to develop risk response strategies. There are four main strategies for managing risks: avoid, mitigate, transfer, or accept. All risks should be monitored and controlled throughout the project lifecycle, and new risks should be regularly identified and added.

It is important to establish risk thresholds that define the level of risk that is acceptable for the project. This can involve setting limits on budget, timeline, or other project parameters that could be impacted by risk. Risk management tools enable organisations to set controls triggering notifications when risk reaches an undesirable level or when deadlines or budgets are exceeded – enabling action to be taken.

Still not convinced that your organisation warrants a project management platform with risk management capabilities? Here are 10 key benefits of managing project risk in a GRC platform:

1. Improved Risk Identification: GRC platforms enable organisations to identify potential project risks quickly and efficiently, thanks to features like online risk assessments, risk mapping, and risk registers.
2. Best-Practice Risk Assessments: GRC platforms provide standardised templates and processes for risk assessments, which ensures that all project risks are assessed objectively and consistently with all information feeding directly into the platform.
3. Efficient Risk Prioritisation: The ability to prioritise risks based on their potential impact and likelihood of occurrence enables organisations to focus resources on managing the most critical risks.
4. Comprehensive Risk Mitigation: GRC platforms provide a range of risk mitigation strategies, including risk avoidance, risk transfer, risk reduction, and risk acceptance, keeping a complete log of how all risks were handled.
5. Increased Transparency: By managing ‘project risk’ in a GRC platform, all stakeholders have access to the same information, promoting transparency and collaboration.
6. Better Decision-Making: GRC platforms provide real-time visibility into project risks, enabling organisations to make informed decisions based on accurate data.
7. Regulatory Compliance: GRC platforms help organisations comply with regulatory requirements by providing compliance management features, including compliance assessments and monitoring.
8. Reduced Costs: By identifying and mitigating project risks early, GRC platforms help organisations avoid costly project delays, budget overruns, and legal disputes.
9. Improved Project Performance: By managing project risks effectively, organisations can improve project performance and achieve their project objectives more efficiently.
10. Greater Business Resilience: By integrating project risk management into their overall risk management strategy, organisations can build greater resilience to both internal and external risks, enhancing their long-term success.

Effective project management requires a proactive approach to managing project risk. Organisations must identify potential risks, prioritise them, and develop effective mitigation strategies to minimise their impact. Managing project risk involves ongoing monitoring, communication, and documentation, which can be significantly enhanced through the use of a GRC platform. By managing project risk effectively, organisations can improve project performance, enhance stakeholder confidence, and build greater resilience to internal and external risks. Ultimately, managing project risk is a critical component of successful project management, and organisations that prioritise risk management are more likely to achieve their project objectives and drive long-term success.

By anticipating potential risks and having a plan in place to mitigate or avoid them, project managers can make informed decisions, allocate resources effectively, and ensure that the project is completed on time, within budget, and to the desired quality standards.

If you think a project management platform with risk management capabilities could help your organisation to deliver and prioritise projects more effectively, request a demo.