Whatever the type and size of the project, every kind of project could get the benefit from risk management.
The key goal of this step is to determine the exact level of risk management to fit into a particular project.
Planning risk management process ensures the following:
- Given the criticality and perceived level of project risk, the level and visibility of risk management activities are suitable.
- Adequate time and resources for risk management activities are included in the schedule and budget of the project.
- The project team assigned to deal with risk management has a structured process to evaluate and respond to risks.
An Overview of Risk Management Planning Process
The risk management planning step defines the tools and approach used to mitigate the risks of a particular project during each step of the project risk management process.
Here are various tools and techniques available to support every step. It depends on the development phase of the project, resource availability, complexity, and quality of input data are the factors on which selection of tools is made.
- Reviewing the scope, objectives, and constraints of the project: It is important to understand the objectives, scope, and constraints of the particular project to clarify the necessary elements to project success. Like, if a project has a fixed completion date, it is good to know what chances are there that it will reach completion before or on the fixed completion date.
- There should be a scope of risk management efforts that goes beyond answering such questions. If so, a risk management plan has to allow for sufficient time and resources to do a quantitative risk analysis.
- Knowing the tolerance for risk: There is a need to first understand and calculate the risk that project may bear according to overall tolerance and risk appetite.
- Defining the roles and responsibilities: For effective project management, the early and consistent participation of team members is a must. The outside help of subject matter experts is also essential if appropriate.
- To ensure that the suitable resources are as per the project commitment, the documentation of roles and responsibilities throughout the planning phase is really important. The roles and responsibilities are adjustable for risk tolerance at the organizational level.
- Documenting decisions: A Risk management plan for simple projects could simply include the project manager who establishes and communicates the general approach to risk management.
- The team has to follow this approach for a particular project. As the complexity and size of the project increases, the project manager will certainly need to develop a more formal plan.
The outcome of the planning process should be finally documented in a risk management plan. It will help in:
- Ensuring the plan is completely based on the needs of a given project
- Provide means of communication to ensure risk management activities are included in the project schedule, resource requirements and budget.
- Offer a bottom line for updates and assessments
- Give a structured road map for a project team to implement the risk management process for a project.
Efficient planning is must to provide the base for implementing a comprehensive, organizes an iterative procedure to manage the project risk. The planning function of risk management is better to perform as early as possible during the project lifecycle. This will help identify risks on time to include any essential response actions into final designs.
A risk management approach is established in an initial planning phase. However, it does not mean that the plan should remain the same for the complete duration of the project. When new information is available with the project progress, it is useful to reevaluate the initial plan to measure effectiveness and make necessary adjustments.
Project Team or Participants
The project manager, along with the project team should identify the essential resources for performing risk management activities. The project manager can also communicate with project stakeholders and sponsors to get their views and support for planning.
However, the specific tools, processes, and resources may vary according to a particular project. Thus, it is of utmost importance for stakeholders and management to align with the chosen method.
The risk planning should develop consistently with the overall planning of the project and development process. In this scenario, the scope of work, project charter, documents with project assumptions and constraints are the key inputs that will inform the risk management plan.
It is also useful for the project team to hold an informal organizational scan to determine the sensitivity of the project towards risk. In addition, historical data or lessons from past projects can also help create an appropriate risk management plan to apply on a particular project.
Risk Management Planning Output
- The output of risk management planning should confirm:
- The objective and purpose to perform the project risk management.
- The project team roles and responsibilities as per the activities of project risk management.
- The timeline or schedule to perform risk management activities.
- The tools, techniques, and approach used for assessing or managing project risks.
- The depth of risk analysis needed.
- The requirements for documentation and risk reporting.
These results describe the structure and performance of the risk management process. The content plan will vary as per the size and complexity of the project, but generally, it consists of:
- The risk rating guidance (for e.g., low medium or high probability)
- The agenda and schedule to define the milestones and periodic risk reviews for risk management
- Formats required for inputs and reporting
- Tracking and monitoring requirements
The size and complexity of the project should balance with the detail and time used in the risk management plan.
Factors that Assures the Success
The success of risk management planning includes the following best practices:
- Achieve mutual understanding on project goals
- Understanding the risk tolerance
- A balance between the cost and benefit of project risk management
- Paying enough attention to project opportunities
- Involving the project team and stakeholders
The risk management planning in the project involves defining tools, approach, and resources that will be required to perform project risk management throughout the course of the project.
To manage the risk over the complete project lifecycle, planning the activities is vital to ensure the scalability of risk management. It also creates the probability that adequate resources for project risk management are integrated with the budget and schedule of the budget.