Mar 26, 2024, Business

Navigating Uncertainty: Effective Strategies for Managing Project Risks

iteo team
managing project risks visualization
Sometimes, even the best project planning might not guarantee success. This usually happens when we fail to recognize or simply underestimate the risks that may arise. That’s why risk identification and ongoing monitoring are among the most crucial phases of a project.

In this article, we will uncover what lies behind the word risk, how to identify, monitor and manage it, as well as how to assess its impact.

Risk - what exactly is it?

Risks can be both threats that can act as blockers in projects as well as opportunities aimed to help. As for threats, an example could be inadequate infrastructure, and in that case the earlier you identify such a risk, the easier it is to manage it. Regarding opportunities, it could be a situation where a client receives additional budget during the project – if you don’t have a prepared action plan, you might lose this chance, and the funds might be allocated elsewhere.

Both of these situations share a common feature – if we don’t recognize them in time, we won’t be able to manage them effectively, and as a result, we won’t be able to take the appropriate actions to either avoid the threat or capitalize on the opportunity when it arises.

Risk identification

The first stage of risk identification should be conducted right at the beginning during project planning.

One method of identifying risks is a simple analysis with the team. Start by preparing a straightforward list – include everything you believe could go wrong and everything that could positively impact the project.

sticky notes with potential risks

Initially, write down everything that comes to mind. In the second step, examine the schedule and list risks related to the timeline. Then, in the third step, look at the scope and list risks that can arise from it. After these three steps, categorize the risks into threats and opportunities, then create two separate lists and subject them to further team analysis.

Impact and likelihood of occurrence

To create an effective risk log, you need to identify from your list of potential risks those that are most probable and will have the greatest impact on the project.

For this purpose, you and your team can agree that each member selects five risks they believe will have the most significant impact on the project and mark them with a star *. 

 

In the second step, conduct another vote – this time, each person chooses five risks they believe are highly likely to occur and marks them with a hashtag #. This process is essentially the beginning of a qualitative analysis of the risks we’ve identified.

Then, summarize the voting and place your risks on a matrix.

risk matrix

Arrange the risks from left to right according to the increasing number of #s, and then move them up or down based on the number of *s, adding in the appropriate place those risks that received only *s.

Next, starting from the top right section of the matrix, list out 5-6 risks which will be key for you to devise a strategy. This approach allows you to focus on the most critical risks, which is essential in a world of limited resources and budgets.

Response strategy

At this stage, you can decide which threats in the project are acceptable and which ones need to be avoided at all costs – meaning you will take actions to minimize them. This is also the stage where you can decide what steps should be taken if a particular risk occurs in the project and who will be responsible for it. Having a brief action plan helps maintain composure in often very challenging situations, make the best decisions for the project, and act without paralysis.

At this point, you can also try to transfer selected risks outside the team (for example, the risk of delay in material delivery by an external company can be transferred to that company, by making your project milestones dependent on their delivery schedules).

It’s also valid to plan a strategy in analyzing opportunities – identify those you simply accept and those that are important to you. Then take actions to maximize their occurrence. This proactive approach allows you to be prepared not only to mitigate risks but also to seize potential opportunities that can benefit the project.

Monitoring and Management

Once you have identified the risks, record them in a risk log, assign an appropriate level of impact and likelihood of occurrence, and then monitor them throughout the project.

Example of a risk log:

risk log

Additionally, select specific individuals who will monitor the occurrence of particular threats in the project. This will ensure you are prepared to deal with them if they arise.

Review this list weekly and analyze it. Remember to modify the risk log as the project progresses and you gain more knowledge about it. If the situation changes, the likelihood of a risk occurring may increase or decrease – record every change in the risk log.

Analyze the situation in the project, the events that take place, and control them to minimize the occurrence of risks. This ongoing vigilance is key to proactive risk management.

Summary

Imagine that during your project, you receive a great opportunity – a highly experienced developer, a potential game-changer, can join your team. As a project manager, you and your team have a plan for such a situation, enabling you to quickly and efficiently integrate the new member into the project. As a result, you fully capitalize on this opportunity and deliver the project ahead of schedule. Sounds incredible? Yet, it is entirely achievable – you just need to recognize your opportunities at the planning stage and then seize them.

Now, picture a different scenario – the deadline for receiving mock-ups from the client arrives, but they inform you of a delay; the materials will be ready in two weeks. Without a plan B, your team is lost… working aimlessly… unsure of what to focus on… losing time, and consequently, budget… with work not progressing… morale dwindling… motivation decreasing… everything collapsing… BOOM… All of this could have been avoided by properly identifying this risk and preparing an action plan in case it materializes. In such situations, you need to act quickly and with a clear head – early risk analysis and having a plan B allows you and your team to remain calm and continue working effectively.

Let’s not kid ourselves – there are no perfect projects. However, we can make a project nearly ideal through proper management. Remember about risk identification and analysis, as well as developing appropriate strategies for managing them. This will better prepare you for reality and crisis situations, as well as enable efficient operation and successful project completion. So, identify, analyze, manage, and sleep soundly.

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