How To Create A Risk Management Plan For Your Project

How To Create A Risk Management Plan For Your Project

When you’re managing a project, having an effective risk management plan in place is essential. Not only will an effective plan protect your people from unnecessary risk, it will ensure that you remain compliant and are doing your best to keep your workplace safe.

In emergencies, a risk management plan can stop things escalating and getting out of hand, as well as putting your mind at ease prior to an incident occurring. Take a look at how to create a risk management plan for your project in our handy article.

What Risks Could Take Place?

The first stage of any risk management plan is assessing what could actually happen. Once you’re more aware of the risks that are present, you can start to plan and prepare for them. Sometimes this process takes thought, as risks can be quite hidden. However, ensuring that you know what series of events could be putting your business at risk is a sure fire way to minimise them.

To uncover the risks that your business faces, there are some questions you need to ask yourself, and your staff. These are:

  • What might happen in this environment?

The environment is often one of the most common areas of risk. Take into account what your people have to do within the work environment and identify any dangerous areas where risk could be heightened.

  • Who would be at risk?

If something were to happen, who could be at risk and how are they protected at present? Are they aware of the risks that they face at work? Could more be done to educate your people on the risks within the environment? 

  • What would the impact be if the worst case scenario did happen

If something terrible did happen, it’s important to work out what the worst case scenario would be and how you would manage it if it did happen. Impact is an important indicator of how urgently you need to manage that risk.

  • What is the probability of this risk happening?

Within your project, it is good to predict the probability of the risk and whether the likelihood of it happening is imminent. If so, you’ll need to take immediate action, however in most cases the risks are not imminent and therefore you can create a risk management plan to prepare ahead of time.

  • Mitigation: how can you mitigate the risk?

There will be things that you can do to mitigate the risk to your people and your business. You may assess whether you have adequate training, software and staff to manage risks within your business.

  • Contingency: can you reduce the impact?

If you can’t mitigate the risk, you may be able to reduce the impact. There will be a level of risk that you simply can’t avoid, however you should be able to minimise the impact if that risk were to happen.

Discover The Assumed Risks And Exposure

Exposure needs to be considered within the risk management plan – that is, the amount of risk you can’t avoid. This can also be described as threat, liability or severity. 

By figuring out the assumed risk you can work out the costs vs costs savings of implementing certain risk solutions. Assumed Risk is reduced to a dollar value which is then used to calculate the profitability of the end product.

This is often a simple cost vs. benefits formula. You might use these elements to determine if the risk of implementing the change is higher or lower than the risk of not implementing the change.

Create A Risk Management Plan In 10 Steps

Once you have those risks assessed, it’s time to get on top of the risk management plan for your project. Here’s how.

Step One: Define The Project

Define the project, your objectives, and the risks that come with each objective. You should measure your risk in terms of impact and mark the risk and impact in terms of high medium and low.

Step Two: Ask People What Risks They Face

If you’re creating a risk management plan, it’s likely that you’re not on the ground facing the risks day to day. In order to cover all bases, you will need to collaborate with the people who face the risks. Ask people who are familiar with the project what the risks are and how they feel risks could be mitigated.

Step Three: Look At The Consequences

With a risk management plan, the idea is to always plan ahead. What would happen if the risks materialised? Planning this out will ensure that when/if something does happen, you will have a plan in place and be aware of the consequences and the potential spiral effects.

Step Four: Assign Probability Of Risk

Which risks are most likely to come true? For each risk element on your list, determine if the likelihood of it actually materialising is High, Medium or Low. 

Step Five: Assign Impact

In general, assign Impact as High, Medium or Low based on some pre-established guidelines. 

Step Six: Determine Risk For The Element

Often, a table is used for this. If you have used the Low, Medium and High values for Probability and Impact, the top table is most useful. If you have used numeric values, you will need to consider a bit more complex rating system similar to the second table here. It is important to note that there is no universal formula for combining Probability and Impact; that will vary between people and projects. 

Step Seven: Rank The Risks

List all the elements you have identified from the highest risk to the lowest risk and compute a total risk. 

Step Eight: Develop Mitigation Strategies

Develop mitigation strategies that reduce the possibility that a risk will materialise. 

Step Nine: Develop Contingency Plans

Contingency is designed to reduce the impact if a risk does materialise. Again, you will usually only develop contingencies for High and Medium elements. 

Step Ten: Analyse The Effectiveness Of Strategies

How much have you reduced the Probability and Impact? Evaluate your Contingency and Mitigation strategies and reassign Effective Ratings to your risks.

An Effective Risk Management Plan

This is a very simplified version of the process that you might go through to create a risk management plan for your project, however it should help to point you in the right direction.

For more information,  you can take a look at our risk management solutions that help you assess and register risk.

 

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