Project Risk Management – A time and money saver

Any project that requires the investment of capital, either internally budgeted, or externally funded, will have risk factors which may pose a potential threat to the successful implementation of the project as well as to various stakeholders involved.  Although not all factors may be controlled, attempts must certainly be made to pre-empt potential issues through good project risk management.

A process for project risk management thus assists an organisation to ensure that project specific risks are identified and their causes determined so appropriate strategies can be implemented to avoid, transfer or reduce the identified project risks to acceptable levels.  This procedure needs to be aligned with and built on the organisation’s Enterprise Risk Management policy or framework and its processes, to ensure consistency in the identification and management of risks. The complexity and level of detail involved in Project Risk Management must be appropriate to the value of the Project and the perceived level of risk. 

Project Risk Management is to occur at each project stage to ensure risks that have the potential for significant impact, are identified throughout the project.  These risks would be assessed and evaluated, which gives a measure of probability and potential impact. The risk information is to be documented to show the prioritised high level risks faced by the project. This will enable an organisation to focus on the more significant risks and implement appropriate risk mitigation strategies to reduce the identified risks to levels which are tolerable to the project in particular and the organisation as a whole. Thus, the level of effort spent managing problems and issues in projects can be reduced through appropriate action being taken to proactively manage risks.  

Some examples of considerations or risks at various project stages may be as follows:

• Initiation Phase: Fit of concept with the organisation’s Strategic Plan
• Planning Phase: Identification of Project Team interested and affected parties.
• Execution Phase: Execution carried out within budget and schedule.
• Closure Phase: Risks to operations once commissioned.
• Monitoring and Control: Ongoing monitoring of the Return on Investment.

The management of change is a critical component of project risk management as internally driven changes, or externally detected changes are triggers for assessing risk.  This ensures that when a change could or has occurred, risks to the project, or organisation will be assessed and can be proactively managed. Risks may be involved with the change process itself, or the achievement of project and business objectives.

We cannot control all events or circumstances, even if we wanted to.  We can only pre-empt and manage, so as not to be caught by surprise.  This attitude and approach will increase the confidence of both a project team, as well investors.

By Vanessa Payne