Risk Analysis and Management
All projects have some elements of uncertainty about them, and that is where Project Risks comes in the picture. There can be Individual Risks within each process or risk at a step of a project. There can also be few instances or points which accumulate to create an overall project risk.
This knowledge area focuses on helping us to understand
- What is needed to identify the risk events?
- How to analyze them.
- How to develop strategies to develop them.
First of all we will learn what is Risk? There might be hundreds of explanation or definition but this is what I have gathered and I have tried to explain it in a simple language. Risk Analysis is the process of defining and analyzing the dangers to the project or caused by the project.
A well developed Risk Management Plan should reduce the risk for project failure. It should be able to determine if the proposed project carries more risks than the organization is willing to afford. It should be able to help in adjusting the cost and profit projections on the risk identified at any point. Before even starting a project a basic or an initial risk assessment should be performed.
A project risk is an uncertain event or condition which has direct or indirect impact on the company or project with respect to time, cost, scope or quality.
Risk Analysis includes the following steps:
- Get the Risk List.
- Assign likelihood and impact.
- Develop mitigation techniques.
- Quantify Mitigation + Quantify Impact.
Get the Risk List: First thing you need to do is to gather all the risk points that you can think of with the help of the Project Managers, Architects, SMEs, Clients and the Representatives working on the project and other vendors if needed [Conduct a Risk Identification Session]. Try to note their points that they feel might go wrong or might create a risk in terms of Scope, Time, Cost and Quality of the Project. Create a Risk List. This is very important and vital to start off the project on the right track. Not to forget it is also important to ensure the quality of the project the company will be delivering and likelihood of delivering it in the given time.
Assign Likelihood and Impact: Once we have the Risk List ready we [Business Analyst along with the Senior Team Members working on the project] can categorize each and every risk according to the likelihood and impact of that risk might be. Try to keep it simple. Categorize the likelihood and impact in ‘low’, ‘medium’ or ‘high’. We perform this to prioritize which risk to be worked on first.
Develop Mitigation Techniques: Once we have categorized the risks we can start developing the mitigation techniques for the risks having high likelihood and high impact. Once that is done we can continue for medium likelihood high impact, medium likelihood medium impact, low likelihood medium impact and then finally low likelihood and low impact. Start with your most likely highest impact to least likely lowest impact. The high likely high impact will have more thorough mitigation techniques than those that may not happen. At the end just make sure that you have mitigation techniques for all the risks identified in the risk list.
Quantify Mitigation and Quantify Impact: Once you have developed those mitigation techniques, it is very important to estimate the cost of that mitigation technique might be and also quantify the impact in terms of the cost of the risk might be to the project.
Once you have the quantified mitigation and quantified the impact of the risk on the project you work doesn’t end here. You will again conduct the Risk Identification Session and revisit all the people who attended the first session. In your meetings make sure that you get the risk list along and note down if there is any new risk coming from the project team or if possible or wherever needed change the likelihood or impact of any particular risk. You need to always have the risk list handy and updated. For that make sure that the Risk Identification Session is conducted on a regular basis to prevent from the risk from happening.
I hope this will help you understand and bring a ease while managing the risks occurred in the project. Please feel free to ask me questions related to this topic.