An Example of Project Risk Management Planning
Exemplar for Managing Risk and Project Planning to Mitigate Risk
Dec 24, 2008
Managing project risk is essential to a successful project and should focus on those risks that are likely to happen and have a high impact. As the likelihood reduces then a judgment is made as to whether to take any action. For example, a software vendor delivering a key product for the project may go bankrupt but the probability is very low even though the impact is high. If the impact is low then maybe it is better to simply let it happen, if it does, and deal with the low impact consequences.
Managing Project Risk
Ineffective project risk management is likely to lead to project failure and so project managers and managers should actively manage project risk. Managing project risk is not rocket science but it is rarely done well. The following example is to show how to think about project risk and uses the example “Lack of test resource to do testing” from Identify Project Risks Early and Plan Response. Assume that the probability for this project risk is high and obviously the impact is high. There are four risk mitigation strategies:
- To accept the risk, do nothing about it and accept the consequences
- To avoid the risk so it doesn’t happen
- Mitigate the risk, influence probability or impact
- To transfer risk, so someone else bears the risk and consequences
Accept the Risk – Do Nothing
Doing nothing may be acceptable in some circumstances because the low probability of it occurring does not justify taking any action or because the consequences do not warrant any preventative measures. In both cases no action is taken after identifying the risk and this decision should be recorded. However, in this example case doing nothing is not acceptable.
Avoid the Risk
Avoiding the risk can usually be achieved by changing the plan so that the risk is simply never there but in this case testing cannot be avoided. Given that, avoiding the risk becomes ensuring that there will always be testers to do the testing. This could be achieved by bringing in temporary staff to perform the testing or using temporary staff to backfill the permanent staff whilst they do the testing. In both cases the acquisition of dedicated resource ensures that the risk is avoided.
Mitigate the Risk
To mitigate the risk requires reducing either the impact or probability of the risk event. Lack of testers could be mitigated by:
- Obtaining senior management commitment of resource
- Standby testers who will step in only if required
- Plan sufficient time for testing so that even with reduced numbers of testers the schedule is not impacted
- Change the schedule to avoid times that are likely to cause resource conflicts [holidays, company events…]
Transfer the Risk
The final option is to transfer the risk to a third party so that they carry the risk. In this case third party suppliers could be engaged to perform the test work and consequently it becomes their problem to ensure that they can meet the agreed schedule and terms of the contract. Of course, in large organisations that third party may be an internal supplier of services but the principle of transferring risk still stands.
What approach or combination of approaches is taken needs to be decided and all such decisions should be recorded in the project risk management plan and when appropriate the main project plan should reflect those risk mitigation tasks. Actively managing project risk is another step closer to a successful project.
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