I noted earlier that I would write a series of posts on risk management. That series will largely be based on the Project Management Body of Knowledge (PMBOK), Fourth Edition. But I thought it best to first discuss and frame the issue of risk management. Why would we do it? And what are the impediments in an organization to doing it effectively?
In the last session, I gave an overview of what risk is and why it might be important, if not mandatory, to do risk management in your project. Today I want to talk about the first level of risk planning, which is to create a risk management plan. Now these management plans that we often see in the Project Management Body of Knowledge (PMBOK)
Now that we’ve done our risk management planning, the very next step is to identify risks. This is exactly what it sounds like – brainstorming to figure out what possible bad things might crop up to bite you during the project. How do you do this? Well, quite simply, get the team in a room. With stickies. First thing you should have them do
Now that you’ve identified all the risks on the project, you have to figure out which ones have priority over others, either by imminence or, most likely, by greatest probability and impact. They can’t all be priority number one no matter how much easier that may seem for us. PMI calls this process Qualitative Risk Analysis. They say that,
If you were following the PMBOK religiously, the next thing you would do is quantify risk which “is the process of numerically analyzing the effect of identified risks on overall project objectives.” 1 Choices here are: ·Sensitivity analysis – looking at the impact of an individual risk on a project objective ·Expected Monetary Value –
So now that we’ve looked at avoid and transfer, let’s look at accept and mitigate: Accept. There are two kinds of acceptance: passive and active. Passive means exactly what it sounds like – I recognize the risk but don’t do anything about it. This is typically for a risk that is so low in impact and probability that you don’t need to