Answer:
The risk management process can be summarised into simple but effective steps.
1. Identification / Recognition of Risk: You can't manage risk if you haven't identified it. Project risks can be very overwhelming. But here are some steps that can help you do so:
- Consider every aspect of the project
- Look at worst-case scenarios with respect to each milestone/aspect of the project. Ask the question "what is the worst occurent that can take place?"
- Consulting an expert can also be a quick way to properly identify risks. This is so because they have many years of experience doing so. The downside to this is that it can be expensive.
- Carrying out internal and external research
- Getting regular feedback from employees. Employees are the ones who operate the process. Their experiences are invaluable.
- Documenting and examining complaints from customers. This is one of the best ways of protecting one's brand for loss of equity. Customers are a strong gauge of whether or not the company is doing it right.
Once risks have been identified, they can be inserted into a Project Risk Register.
A project risk register is can be a hard document or an electronic document which itemizes all the risks relating to a project as well as their nature. It helps the project manager to keep an eye on all regulatory and compliance risks.
2. Risk Analysis
Risk analysis refers to the process of grouping risks according to their probability of occurence as well as their potential impact on the Project.
3. Risk Evaluation
This refers to the categorization of the risks according to the size of potential damage to the project if they occurred. Some of them will require urgent and or serious attention, others, on the balance of probability will require little or no treatment as their likelihood of occurrence and consequences are very low.
4. Transfer, Mitigate, or Eliminate the Risk
There are several ways to remove or reduce risks. Some of them are:
- Use of policies: Policies modify and guide human behaviour within an organisation. When people do the right thing, there is less risk to worry about.
- Use of contracts: Many of the risks which can affect a project can arise from the contract. Having a legal professional go through a contract can help to reduce risks associated with entering into the same.
- Insurance: This is a risk transfer mechanism which allows an insurance company to take on the risks of a project or a business in exchange for a premium.
5. Continously review and monitor the Risks
The Project Risk Register is a good tool for reviewing and monitoring risks.
When there is a new development with the project, it is important to ask the question "how does this modify our risk exposure".
If for instance, the geographical location for a construction project has changed, this may significantly alter the risks universe of the project and needs to be reviewed/managed using steps 1-4 above.
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