Cost-Effective Risk Project Management Methods to Consider

Tackling risk management effectively takes time, energy, and critical thinking about your organization’s processes and goals. While it may feel like a big undertaking, your organization can make it less painful by assessing risk for each new project using a consistent framework.

What are the five methods of risk management?

The risk management process is comprehensive, spanning from a high-level risk analysis of organizational processes all the way down to project-based and ongoing risk assessments. To minimize time—and money—use the following methods of a well-rounded risk project management plan.

1. Identify risks

The first step in risk management is risk identification. When determining risks for a project, conduct a thorough examination of each step of the project and identify what threats exist. Try to look at a project from multiple angles—determine risk factors for any subcontractor work, timeline disruptions, supplier or service interruptions, or IT failures.

2. Analyze risks

When your team has identified risks, the next step is analyzing each potential risk and its primary driver. For example, a shortage of equipment or qualified staff could disrupt the project timeline. Or, insufficient cybersecurity protocols could lead to an information security breach. An appointed risk manager should be able to financially assess each risk, perhaps with the use of risk analysis software.

3. Prioritize risks

While risk identification could unveil an overwhelming amount of threats, it’s vital to prioritize risks based on the likelihood and impact of occurrence. Not only will prioritization save time, but it will also allow your organization to focus on threats that pose the greatest potential for financial damage to your business. 

4. Create an action plan

For each prioritized risk, develop an action plan to prevent the risk from occurring or to reduce the impact of each risk event. For example, if your organization has identified a fault in a product line, it may be necessary to change materials or subcontractors to minimize the future risk of sub-standard goods. Create contingency plans for risks that can’t be prevented, such as floods or other natural disasters.

5. Monitor risks

When your action plans are in place, the final step is reviewing and monitoring each risk. A risk manager should work with project managers and keep tabs on each risk while observing for any changes. The risk management process should be responsive and evolve with new projects and organizational goals.

How do you use risk management for projects?

Beyond broad organizational risk management, it’s helpful to use the above methodology for each new project within your organization. To do this efficiently, risk managers and project managers should work together in the initial stages of the project creation to thoroughly assess risk and action plans. 

Project managers should also incorporate team members to collaboratively assess potential threats, and any other stakeholders involved in the project. By holding a collaborative risk identification session, your team will have an opportunity to identify risks from multiple perspectives.

When a risk management plan is in place for a given project, project managers should take responsibility for ongoing monitoring and assessment of each identified risk. Hold regular meetings with your project team, and use the monitoring framework to manage changes or new risks as they present themselves through the lifecycle of your project.

Techniques for measuring project risk

There are several tools and procedures that may be helpful during your risk identification session with your teams, such as brainstorming, root cause analysis, and the SWOT matrix.

Brainstorming

The first step in your risk identification process is the brainstorming session. As described above, the more collaborative your brainstorming, the more complete your risk analysis will be. Include all members of your team, including subcontractors and periphery support including IT and cybersecurity professionals in your organization. 

Each team member should consider potential shortfalls or issues that could arise in their project contribution, and risk managers alongside project managers should compile all risks for analysis.

Root cause analysis

Root cause analysis looks at the fundamentals of each risk and possible preventive measures. This process can dig up deeper issues that may have larger impacts than initially identified, such as procedural shortfalls or inadequate staff training.

SWOT

SWOT stands for strengths, weaknesses, opportunities, and threats, and is used to help identify project risks.

First, identify the project strengths, whether it’s product design or branding successes. Then, consider weaknesses to help identify where risks may sneak in. Opportunities refer to the possible positive outcome for the project, and threats help to identify risks that could prevent your ability to achieve your project objectives.

Compile your findings into a four-square grid, with the strengths on the left and weaknesses on the right. Place opportunities under strengths, and threats under weaknesses. By organizing your findings this way, your team will be able to easily identify and cross-reference internal and external threats for risk assessment.

By using the risk management framework for each project and initiative, your organization will have a solid methodology in place to maintain cost- and time-efficiency. Identifying risks and establishing action plans will help avoid costly mistakes or errors, and will help your organization be fundamentally agile in its processes.