If you are new to risk analysis and risk management, the impact for your project can seem like a draw on resources with little benefit. However, if viewed as contributing to the identification of deliverables and the tasks that produce them, risk management begins to make sense. The key is take the analysis through to the end and identify actions to be addressed.
Risk management in this context can be seen simply as four steps, the:
- Identification of risks
- Assessment of their likelihood and impact
- Prioritisation of the risks and the responses to them
- Implementation of actions that address the prioritised risks.
Prioritisation of risks will involve looking at the overall context and strategy of the organisation, the objectives and constraints of the project and the desire and resources for action (the so called 'appetite for risk').
Actions to address risks will be determined by the approaches chosen for each, typically falling into one or more of:
- Reduce - prevention, mitigation and/or contingency
- Share - transfer risk via insurance or outsourcing
- Accept - "live" with the risk because the likelihood is very low or the cost of reduction or sharing is too high
- Avoid - stop doing the activity or action that carries the risk.
It is common practice to record the key attributes from this analysis, together with the initial decisions, in a risk register or log.
The register is the critical input into the final, action planning step. The resulting plans will contain a mix of deliverables that:
- Prevent or reduce the likelihood of the risk arising
- Mitigate the impact of the risk should it arise, including the planning of budget and resources to deal with the problem should it arise
- Contingency plans that minimise the impact and restore the situation.
The deliverables and actions are then integrated within the overall project plan or, if appropriate, assigned to owners outside of the project for attention.
In the next post I will illustrate a simple approach using MindGenius to generate action plans to address individual risks.
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