7 Tips on How to Do a Risk Assessment for a Project
A post from our Project Management blog
Written by Jordan James
Risks are a natural part of a project and therefore, risk assessment should be a natural part of project planning as well. Unfortunately, that's not always the case – and risk assessment isn't always as easy and quick as it seems. It takes time, patience and keen understanding to identify and account for potentials risks that you might face in your project.
However, assessing risks early on and planning for them can contribute to the success of your project so it's worth the time and effort. If you face a problem during the course of your project, you'll be well equipped to deal with it if you have a sound plan.
At this stage of planning, if you involve your entire team, they'll be aware of the potential problems and will know how to deal with it as soon as possible. Risk assessment is a vital step in planning, which can help you navigate potential difficulties and plan for different eventualities.
But how exactly should you do a risk assessment for a project? Are there any important factors you should consider before you begin?
The first step is risk identification. You and your team should sit down and work together to identify all possible risks that your project could face. Make sure to consider the entire project as a whole. Don't just focus on one phase, assess the risks in that particular phase and then defer assessment of the following ones. You'll be limiting your sight and your ability to react by doing that.
Look at your project thoroughly and understand what could potentially cause it to go over the budget, get delayed or stalled completely. Project risks can happen due to several different factors. Your workers might unexpectedly ask for leave or quit, or there might be changes in the economy that could affect the prices of raw materials. There could also be natural, political, financial, technological, or even operational problems that you'll have to take into account.
Make a detailed list of all the problems that can potentially affect your project, and make sure that your team contributes their opinions and observations as well. As they say, two sets of eyes are better than one. Several sets of eyes would definitely prove to be useful in this case.
2. Offload some risks
If you find an opportunity to offload some of your risks, do it. Transferring the risks to a third party is a great way to reduce your workload and responsibilities. It might not always be possible with budget constraints and other restrictions, however, if you have room to transfer some of your risk to someone else, you'll find the benefits sometimes outweigh the costs.
For example, if you think your supplier might be a potential weak link in your project, you can easily acquire your supplies from a company procurement specialist or an operations specialist. This way, they'll assume the risks of dealing with the suppliers and you're free of that responsibility. Now if the supplier causes a problem, you're not responsible for dealing with it.
3. Understand the risks
Understanding the risks involved is the best way of dealing with them. Once you've identified them, think about how much they would impact your project. You can rank them in accordance with probability and impact.
You need to decide how likely it is that the risk might occur. Based on this assessment, you can divide your risks into high probability, medium probability or low probability.
You should also judge the risks on how much of an impact they would have on your project. You can divide them into high impact, medium impact, and low impact. If you're accurate with your assessments and understanding, you might be able to focus your attention on the problems that need it more. You can solve high impact problems before moving onto to other issues, therefore minimising the damage caused.
This way, you might be able to properly predict the impact of the risks on the timeline and the budget of your project. You can convey this information to your clients and everyone involved with the project so that no one is surprised when unexpected delays or expenditures pop up.
4. Consider the probability
While many people are naturally inclined to focus on the risks that will have a high impact on the project, you shouldn't ignore the probability of it happening. For example, if you identify a high impact risk which has a low likelihood of happening, focusing on that wouldn't be a good strategy.
When you create your priority list of risks, keep the ones that have high probability and high impact on the top. You need to keep your focus on the ones which are more likely to happen than the risks that are less likely to occur.
If you can avoid a particular risk then it makes sense to do so. However, that's not always possible, and there are some risks that just can't be avoided. When you're performing your initial risk assessments, identify ones that you can avoid.
For example, if it is related to something that's not entirely essential for the completion of your project and you can afford to cut it from your plans, you could consider that an available option. In the long run, this strategy will pay off.
Unfortunately, some risks can happen unexpectedly and you won't be able to control them. In this case, you can only react to the situation. However, there are some risks that are much easier to keep in check.
You can plan well ahead and decide how you want to deal with them, and install some contingencies. For example, if there's a high likelihood of fire in your project, you can work on ways to prevent the fire from happening from the very beginning. If the fire still occurs, you can have a plan to contain the damage and ensure that injuries and casualties are at a minimum.
7. Have back-up plans
Putting all your eggs in one basket is never a good idea. Make sure to have back-up strategies in place to deal with risks. Assign each identified risk to a particular worker and ask them to be on a look-out for the signs - if they see it developing, they can immediately report to you.
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