No project is without risk and learning how to manage it is vital to a project’s success. Effectively managing your project’s risk allows you to identify the potential impacts, both long and short term, while helping to futureproof and please shareholders. Most importantly, it means you remain in control.
Maintaining control over risks means you’re in a position to make strategic decisions, because you're aware of both the obvious and the hidden impacts on your project. By accurately managing your budgets and costs, you can keep risk finances under control. But for this to be possible, an all-encompassing, modern risk management tool - such as the new Safran Risk Manager - is required.
But even with such a tool at your side, it’s important to understand how risk is managed and how a risk model framework can help.
How Do You Manage Risk?
Risk is defined by the Project Management Institute (PMI) as an uncertain event or condition that has a positive or negative impact on a project’s objectives. Because of the innate level of unpredictability that comes with risk, knowing how to best prepare for, and manage, risk is essential in any project. Identifying risks ahead of time is key to countering them.
Many of us already practice basic risk management in our everyday lives. By taking an umbrella with you when you go outside or putting a portable phone charger in your bag just in case, you’re managing risk.
Managing project risk can be split up into two sections. First is the initial risk assessment, which enables you to determine the capacity for risk in your project and identify the probability of them occurring. With this, you’re able to determine your project’s risk tolerance.
Once the tolerance level is known, your team needs to decide which risks to focus on. Consider your project’s budget when compared to risk impact – if a risk has a high probability of occurring but a negligible impact on the project, then it might not be worth the additional investment. This kind of quantitative risk analysis gives you a concrete idea of which risks to prioritise.
Second is a risk management response plan. Designed to be an on-going process for your project, this helps you prepare for risks in advance. In order to accomplish both stages effectively, model risk management is essential.
The Advantages of Using a Risk Model
Planning for project risk using a risk assessment and management response plan can be condensed into a risk model. Effective risk modeling helps you identify and negate risks before their full impact is felt.
Risk management models are bespoke and are often built during the planning stages of a project. Risk models make use of analytics to help quantify project risks and from there, a plan can be laid out.
Get Ahead of Potential Risks
By identifying risks early, you’re able to equip your team with everything they need to manage them. Communication is vital. Work with your project team to create a list of every possible risk your project might face. Not every risk you identify is a threat to the project, and the early assessment stage of the framework is a great time to discover potential opportunities as well.
Creating a risk register is a great place to begin. A risk register allows you to log and track every risk you find - both threats and opportunities. By laying out the scenarios in your model framework, you prepare your project team for the kind of risks that might arise during the project. Once the risks have been identified, it’s important to determine the probability of them happening. Different risks will have a varied likelihood of occurring, so it’s important to rate them so your team know what to prepare for. The impact of risks can vary from a change of deadline to financial burden.
Improve your project’s chances against unwanted risk even further by incorporating a schedule risk analysis into your model.
keep everyone in the Loop
Communicating the potential risks involved in a project to shareholders has been cited as one of the most important tasks for risk managers. A transparent and honest dialogue between you and the other parties involved in the project is essential. This kind of discussion is one that will help to appease shareholders and shows you’re working proactively rather than trying to fix risk reactively.
By building a risk model, everyone from your project management team to shareholders is aware of the risks from the start. Having everyone on the same page is crucial to dealing with any problems that might occur.
Boost your Project Risk Maturity
An enterprise with a high level of risk maturity is one that can maintain risk to an acceptable standard, in a cost-effective manner.
The better your company is at maintaining that risk level, the higher your standing on the risk maturity ladder will be. Delegating clear roles and responsibilities while creating the risk model, ensuring everyone can be held accountable, contributes towards a higher overall risk maturity. A risk model ensures that should something go wrong in a project, you can begin rectifying the mistake.
While risk models are integral to project success, keeping them cost-effective is a challenge.
Creating a risk model framework is a great way to manage risk, while also improving your risk maturity – but it’s not always easy to keep it cost-effective. Focusing on identifying risks is a great start and project managers need to discover their project’s biggest weaknesses. Promoting cost-effectiveness and value for a project is key in managing risk effectively.
A risk model enables you to assign different members of the project management team their own unique roles. Ensuring those roles stay separate – and allowing everyone to focus on a different potential risk – keeps your risk model more cost-effective. Each of the roles serves a distinct purpose and managing risk is most efficient when everyone contributes in their own way.
Finally, one way of managing costs is to consolidate your risk models, especially on bigger projects that are more likely to overshoot their budgets. By combining risk models, you create a unified risk assessment for your project that will help you keep costs down and increase your risk maturity level.
Including a schedule risk analysis in your risk model can also make it more cost-effective. The analysis is designed to improve the predictability of a project, meaning your team is less likely to overspend or overrun. By incorporating this analysis, resource and labour costs can be reduced.
Identifying risks early and ensuring your project is run in a cost-effective manner can be challenging, which is why it’s helpful to have access to a single tool that can help you manage project risk.
Safran Risk Manager
Safran Risk Manager is built on 20 years of experience managing risks in many businesses. Our brand-new risk management tool utilizes three core principles to present your business with a completely fresh way to manage risk – control, transparency and futureproofing. By using advanced data collection techniques to identify impacts, Safran Risk Manager helps you manage all aspects of your risk environment.
We created the tool after careful consideration with our partners across numerous sectors. This new, all-in-one risk management system is available to demo right now. Safran Risk Manager is incredibly simple to use. A single, web-based application, it enables you to manage all aspects of risk – from identifying the issues early on, to helping you retain complete transparency over the project with those who need to hear from you. The tool is designed to give you a complete picture of your project risk, from the short-term issues to long-term impacts.
Safran Risk Manager’s sophisticated controls mean you can manage, collect, assess, and report on all kinds of risks, both threats and opportunities, while working on the project.
Designed by risk managers to tackle the issues that plague project management, Safran Risk Manager is the best way to deal with your project risk all in one place. Book a demo today.