Risk Management and Scenario Planning
It’s difficult to plan different project scenarios without considering the impact of risks. Risks can either be helpful (opportunities) or harmful (threats) to your project. As a project manager, your goal is to increase the probability of opportunities occurring and decrease the probability of threats occurring, especially those that impact project budget, schedule, scope, and/or quality. According to the Project Management Body of Knowledge, consider the following sequence while predicting and preparing for project risks:
Cause > Risk Event > Impact / Effect > Mitigation > Back-up (if the Mitigation Fails)
Risks can be caused by uncertain assumptions, complex or uncontrollable project dependencies, poorly-constructed processes, conflicting requirements between stakeholders, and even by the residual or secondary effects from the mitigations that are put in place to prepare for risks.
Risk mitigations will vary depending whether the risks are opportunities or threats. According to the Project Management Body of Knowledge, opportunities should be exploited, enhanced, shared, whereas threats should be avoided, transferred, or mitigated (anything that will lessen the effects thereof). Alternatively, project managers can decide to accept both kinds of risks.
Risks can be brainstormed while creating the project communication plan and project management plan. To simplify the listing and organizing of risks, risks can be categorized by the work breakdown structure element(s) that may cause or would be impacted by the risk event.
Project managers can use the following tools to develop and plan scenarios affected by risk events: RADIO, Storyboarding, Governance, Lessons Learned.
RADIO is an acronym, and it stands for Risks, Assumptions, Dependencies, Issues, Opportunities. RADIO elements can come up in any project meeting or conversation, so project managers should get in the habit of listening for and documenting these elements. In the project meetings that I facilitate, I keep a separate poster for RADIO elements, and I document these elements in front of the team and obtain their approval on the description, next steps, and owner(s) associated with each element. Keeping a checklist or register of RADIO items will help project managers prepare for project risk management meetings. Typically, project risk management meetings focus on the risks that carry the highest probability of occurrence with the highest impact (positive or negative) to the project. Many risk and issue management chart templates can be found on the web if your organization is not already using a template, e.g. MindTools, Bright Hub, Key Consulting.
A great way to identify project risks and think through the major or minor effects of executed risk mitigations is to storyboard or use visioning techniques to map out project scenarios from start to finish. The storyboard can focus on an individual or team’s experience as they go through the project steps, tasks, decisions, outcomes, and exchanges with others. Or the focus can be on inanimate project objects, e.g. like data or flow of goods/materials or services. Storyboarding is a great visual tool for teams; by seeing these scenarios unfold, teams can identify potential RADIO (Risk, Assumption, Dependency, Issue, Opportunity) elements and their alternatives. Remember, storyboard visuals do not need to be complex; most of us are not great artists!
I have personally sat in risk management meetings that produced a lot of aggravation and very little results because there was no process to guide the team. Before incorporating project risk management practices in your organization or company, I recommend to arrive at answers to the following questions (and not all questions may apply) to clarify outcomes and team expectations:
- What is the group’s risk threshold, or i.e., what is the company’s tolerance to risk?
- Who provides expertise with regards to risk identification and monitoring?
- How often should risk management be monitored?
- How are change requests to address risks managed and integrated into existing projects/programs?
- There should be contingency reserves for budget and schedule impacts. What is the strategy for allocation, e.g. expected monetary value analysis, scenario planning?
- What are the authority levels for risk management decision making, and which roles will have these responsibilities?
- These authority levels and responsibilities may depend upon the probability & impact levels from the risk identification register, or the contingency reserves that will be allocated.
- What stakeholders need to be involved in this process, and what is the communication plan?
Resourceful project managers refer to lessons learned from other projects to identify patterns of risks and/or issues that may similarly apply to their projects, and what mitigation actions can be taken as preventative measure. RADIO (Risks, Assumptions, Dependencies, Issues, Opportunities) identification matrices or checklists can also be reviewed. These types of resources from previous projects should be used by project managers as “watch lists”; study the early signs and symptoms of problems and put a plan in place to mitigate and manage them before they occur.
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