The proper question would be “why would you ever NOT apply risk management to your project?”
Risks are an inevitable part of our lives, and more so, our projects. If you consider life to be ONE BIG PROJECT, you will see that in most cases you do apply risk management, because well, you never know righ
Let’s define what a “risk” is:
“A risk is an unclear future event that is likely (or bound) to happen and will impact your team’s ability to deliver results and meet objectives.”
In other words, risk is something that most certainly will happen during your project (and you can be sure that it will happen more than once) and will try to mess up all your hard work.
So just like with life, it makes all the sense in the world to practice and apply risk management to your projects.
Benefits of risk management
The benefits are pretty much endless, but in the end they all come down to two essential things time and money. The more carefully you approach the matter, the more time and resources you will be able to save.
There are two kinds of risks good risks (often called opportunities) and bad risks (often called... risks). As a smart manager, you will need to assess both of those in your practice and try to make the most out of every situation.
The good risks that happen during your project can be very effective if utilized correctly. It’s often a bad idea to go chasing after small gains, but sometimes they are right under your nose and all you need to do is just pick them up and move along.
The good risks that come up on your way can be very effective if seized at the right time and place. It’s often considered a bad idea to stray off your main objective and chase after short term gains (for example your goal is to increase website traffic, but you have a really nice opportunity to get a cool website redesign, however it will take a considerable amount of time and resources. It’s a good opportunity, but will make you fall behind from your main goal if you go after it).
But sometimes opportunities are not far away, in fact they are right under your nose and it won’t take much time to seize them (for example your goal is to increase website traffic and you notice an opportunity to get a few qualified leads and forward them to your sales team).
What’s important here is not getting carried away. If you start taking opportunity after opportunity, you will end up in chaos and your project will be left miles behind. You need to clearly define and understand what opportunities are worth taking. Ask yourself:
Is the opportunity worth the time to invest into it?
Is it in line with your project goals?
Will the opportunity benefit the project as a whole or just part of it?
Will you gain a lot by going after the opportunity?
If you answered “no” to at least two questions, then it’s probably not worth it, however tempting it may seem. Sure, you could be wrong and lose an opportunity that could be worth more than expected, but better safe than sorry.
Now the bad risks are a much larger problem to look out for. You might not take any opportunity along your way and still end up doing fine, no huge damage dealt anywhere. However, risks have the potential to kill off your whole project in just a matter of hours, if left unattended. But when the crisis strikes, it’s too damn difficult to think right, which can lead to even more mistakes and making you sink deeper.
This is why you need to plan beforehand. When you anticipate something, it’s much easier to deal with it (you are like “haha! I knew this was coming, just do this”). There are two effective ways to make a risk management plan: people and data.
People are your teammates, colleagues, higher level/more experienced executives and why not, yourself. Have a team meeting for this purpose and discuss ideas that can both help identify potential risks and how to deal with them.
Data is your true friend everywhere, and risks are no exception. Take a look at past, similar projects and analyze carefully. You may find invaluable information on risks, even something that you didn’t even think about. Also, if something happened in a previous project of that sort, chances are high the same thing can happen here.
How to deal with risks
There are three ways that you can deal with harmful risks:
Reduce the chance that something will happen – With the help of your team and research you can identify the potential risks that are likely to happen and reduce the chances of those before they even take place. This is the most effective way to deal with risks: if something doesn’t happen, there is nothing to worry about. Sadly, this doesn’t happen all that often.
Reduce the impact of something happening – When there is no way to nullify the risk before it takes place, the next thing you can do is try to minimize the damage that it may cause. After all, if something happens, but it doesn’t affect your team and work processes as much, it’s still not a big problem.
Find an alternate route – In case when you know that something is coming and you can neither stop it nor weaken the impact, you need to find a good alternative solution. Sometimes there is no way to stop the crisis from emerging and it will be no use to try and avoid it. What DOES make sense though, is trying to find a way to deal with it, when it actually happens.
Have a buffer. Always
One last thing to consider is that there will always be something that neither people nor data can keep you safe from. Unexpected risks are the scariest ones, because there is no way to prepare for them beforehand. This is why you need to have some kind of a buffer for these situations some saved up resources, time, extra workforce or anything else that can help during a crisis.
The downside of this approach is that you practically freeze resources that could be spent for the project, and if nothing really happens, you will end up falling behind. Again, better to be late for a week or two to complete a six month long project, than have everything gone in a few days when you were 80 percent done.
Opportunities and risks will follow you anywhere you go. The key factor here is to keep a cool head and look in the direction of your project. Don’t chase after opportunities that are far away and get ready to defend yourself when the crisis strikes. This is about as safe is it can get for your project. Protect it -)