What is Risk Assessment in Project Management? (2024)

What Is Risk Assessment?

Identifying, assessing, and controlling hazards and risks in the systematic process is the meaning of risk assessment. Determining which safeguards are in place—or ought to be—to eliminate or manage risk in the workplace in any conceivable circ*mstance is the responsibility of a competent person. These evaluations aid in identifying these innate risks and offer countermeasures, procedures, and controls to lessen their adverse effects on business operations.

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Why Do We Need Risk Management?

The project risk management plan addresses the process behind risk management and the risk assessment meeting allows the project team to identify, categorize, prioritize, and mitigate or avoid these risks ahead of time. Risk assessment is a step in a risk management procedure. Risk assessment is the determination of quantitative or qualitative value of risk related to a concrete situation and a recognized threat. Risk assessment involves measuring the probability that a risk will become a reality. But in any project, risk assessment is not a project manager's sole responsibility. A special meeting has to be conducted to bring in the ideas of the entire team or at a minimum the following -

• Project Manager: acts as the chairperson and facilitates the risk assessment meeting
• Project Team: the project manager must assign members of the project team the roles of recorder and timekeeper
• Key Stakeholders: those identified that may bring value in the identification of project risks and/or mitigation and avoidance strategies
• Subject Matter Experts: those identified that may specialize in a certain project activity but are not formally assigned to the project but may add value
• Project Sponsor: may participate depending on the size and scope of the project

Risk Identification

Before plunging into risk assessment, the project manager will have compiled a list of risks from previous project experiences. These will be reviewed at the beginning of the project as a way to identify some common risks. This will also give an insight to the members to predict possible risks. While there are many methods for identifying risks, the Crawford Slip method is very common and effective. Each risk identified and discussed should be stated in a complete sentence which states the cause of the risk, the risk, and the effect that the risk has on the project.

How to Manage Risk?

It's critical to start with a specific definition of what your project is expected to deliver to manage risk. First, create a comprehensive project charter that includes your project's vision, objectives, scope, and deliverables. In this manner, hazards can be found at every project step. Many project managers may simply email their project team asking for information about anything that might go wrong. However, you should conduct a risk identification session with the complete project team, your client's representatives, and vendors to accurately plot project risk. Using a risk tracking template can help you prioritize the amount of risk for each risk you define. After that, develop a risk management strategy that outlines the benefits and drawbacks of the project as well as the activities you will take to address each. As your project advances, you should schedule periodic meetings to monitor risk.

Risk Assessment Examples

Different risk assessments tailored to particular needs and control methods are employed across various sectors. Here are some typical examples of risk assessments:

• A sort of risk assessment called a "health and safety risk assessment" is used by safety managers to identify health and safety concerns related to a job, the workplace, and present processes. There are various types of hazards, including biological, chemical, energy, environmental, and others.
• "Workplace risk assessment" is a method used by office managers and school administrators to ensure there are no workplace health and safety hazards. Additionally, this evaluation raises productivity and morale among workers.
• A fall risk assessment is carried out by the nursing staff at aged care facilities to evaluate the probability of a fall. With this checklist's help, you can ensure that the facilities, tools, and other elements are secure for elderly patients.
• Construction risk assessment is a crucial evaluation performed on construction sites to assist stakeholders in adhering to safety requirements and help safety teams undertake remedial measures.

Options are available for risk assessment tools and methods that can be easily incorporated into a company process. The three often used methods for risk assessment are the decision tree, the bowtie model, the Failure Modes and Effects Analysis (FMEA), and the risk matrix. In addition, what-if analyses, failure tree analyses, and analyses of the operability of hazards are some other methods for risk assessment.

Categorize and Group Duplicates

Categorizing risks is a way to systematically identify the risks and provide a foundation for awareness, understanding and action. Each project will have its own structure and differences. Categorization makes it easy to identify duplicate risks and acts as a trigger for determining additional risks. The most common, easy and the most effective method for this is to post the sticky notes on a large board where the manager has posted categories. The participants then put their risks on the board beneath the appropriate category. As they identify duplicate risks they stick the duplicates on top of the other. The project manager then discusses the risks identified under each category with the participants. All the risks identified, categorized should be documented for the approval of all stakeholders.

Common Phases of Risk Assessment

In many projects, risks are identified and analyzed in a random, brainstorming, fashion. This is often fatal to the success of the project, as unexpected risks arise, which have not been assessed or planned for and have to be dealt with on an emergency basis, rather than be prepared for and defended against in a planned, measured, manner. It is essential that potential risks are identified, categorized, evaluated & documented. Rather than look at each risk independently and randomly, it is much more effective to identify risks and then group them into categories, or, to draw up a list of categories and then to identify potential risks within each category. In general, the following are the usually followed phases in Risk Assessment.

Risk Assessment Steps

Depending on the risks particular to the type of business, the industry that business is in, and the compliance regulations relevant to that specific business or industry, a risk assessment is undertaken in various ways. However, regardless of the nature of their business or industry, organizations can still use the following five general processes -

Step 1

Determine the dangers. Finding possible risks that, if they materialized, would have a negative impact on the organization's ability to conduct business is the first stage in a risk assessment. Natural catastrophes, cyberattacks, utility outages, and power outages are examples of potential risks that might be taken into account or discovered during the risk assessment process.

Step 2

Ascertain who or what might be affected. The next phase is identifying which corporate assets would be adversely affected if the risk materialized after the identified risks. Critical infrastructure, IT systems, business operations, business reputation, and even employee safety are all examples of corporate assets that may be exposed to these risks.

Step 3

Assess the hazards and create preventative measures. A risk analysis can assist in determining the potential effects of risks on business assets and the protective actions that can be taken to lessen or eliminate such effects. For example, risks could result in property damage, financial loss, company interruption, and legal repercussions.

Step 4

Make a record of your findings. The company needs to record the risk assessment results and store them in conveniently accessible formal papers. In addition, records should contain information on prospective risks and strategies for avoiding them.

Step 5

Conduct a frequent review and updating of the risk assessment. Potential threats, risks, and associated controls can alter quickly in a present company context. To keep up with these changes, it's critical for businesses to update their risk assessments regularly.

Qualify Risks (Assign Probability and Impact to Each Risk)

The key questions to assess any risk in projects are: • What is the risk – how will I recognize it if it becomes a reality?

• What is the probability of it happening – high, medium or low?
• How serious a threat does it pose to the project – high, medium or low?
• What are the signals or triggers that we should be looking out for? A risk assessed as highly likely to happen and as having a high impact on the project will obviously need closer attention than a risk that is low in terms of both probability and impact.

Determine Risk Response

For the risks which have been identified with a high risk score, the participants will determine the triggers or causes and identify responses. Responses may include:

• Adding the risk to the project plan and scheduling for it.
• Adding funding to the project to mitigate any potential increase in costs,
• Adding resources to the project to mitigate any potential shortage in assigned resources;
• Developing a course of action for avoiding the risk.

Documentation of Risks

The Project Manager will enter all the risks, probability-impact scores, and responses and maintain a document to explain all risks. The high scoring risks will be added to the Project Management Plan. This document will also be included as an appendix to the Project Management Plan. Additionally, the risks with a high score will be added to the project schedule as a method to track the risk at the correct time. Although these risks are added to the schedule, the schedule itself is not necessarily changed. This step is to provide awareness and visibility to the participants of all high scoring risks throughout the project’s lifecycle.

Managing Risk With Project Manager

A risk tracking template is a good place to start, but project management software will give you even more control over your project risks. The tools the project manager provides, allow you to manage risks at every step of a project.

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