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RISK MANAGEMENT

Ananth Karthik

April 30, 2020

Risk Management

What do we know about Risks and what are the common problems that organizations face?

What do we know about Risks and what are the common problems that organizations face?

We have noticed that Risk is a very delicate topic which people definitely cover before or during the start of the project. However, the interest levels drop or the team forgets about it during the course of the project until they hit a roadblock. Some of the reasons why stakeholders lose interest in risk management during the course of the project are given below.

  1. Being too optimistic and overconfident that everything will be fine and there will not be any issues or concerns and the project will have a smooth completion.
  2. Too busy in executing the project in a hurry to meet the project timeline that they forget to see the risks creeping up.
  3. Insufficient knowledge and carelessness on handling risks or not bringing it up in project meetings.
  4. Team members not aware of the importance of talking about risks even when the project is going well.
  5. Equating risk with money and assuming that if you have the extra budget then the risk can be handled.
  6. The risks for short-term and long-term projects are totally different and have to be mitigated in separate methods. Mixing them would lead to unexpected failure in the project.
  7. Also, there might be external stakeholders like vendors, subcontractors and other entities who do not have the same interest levels or knowledge in monitoring risk such as our company.
  8. Politics in the project/company which leads to loss of interest.

At the beginning of the project, a set of risks are identified and documented. However, over the project duration, the risks might vary and new risks might come into the picture. These need to be monitored on a continuous basis else might lead to disaster. Risk management is a critical component in a project irrespective of the health of the project. Some of the dangers of ignoring risks during implementation are given below.

  1. Projects might get delayed and lead to failure.
  2. Cost of projects might skyrocket because of underestimating risks. This might lead to a loss to the company or might lead to additional billing to the customer which is, in turn, a loss to the customer.
  3. End up losing the customer.
  4. Reduction in brand value for the company thereby leading to undervaluation.
  5. End up losing lives in a manufacturing environment.
  6. Legal and Regulatory issues might arise.

Brainstorm with your team on specific actions that will encourage stakeholders to continue to scan and track the project environment for risk events.

Risk management has to be done in a systematic manner so as to ensure that the risks are mitigated in an appropriate manner. In the below process we are going to cover from the first phase of the project in which risk is identified to the last phase of the project.

The first activity is to identify all the key stakeholders (Team, Project Manager, vendors and so on) in the project and ensure that they are part of all the meetings.

PHASE-1 – PROJECT PLANNING

The project kick-off meeting is initiated and the various resources and skills required for the project are discussed along with the action plan. Risks are identified along with the impact and the mitigation strategy. A sample is given below.

Risks Impact Mitigation
Quality of Modules High QC team will be set up and automated as much as possible to reduce errors.
Volume of delivery Medium The vendor has an expandable team structure which facilitates the addition of team member to address the volume.
Customer review and approval delayed High Alternative team to be identified and the review process to ensure a smooth review cycle.

PHASE-2 – DESIGN PHASE

NOTE: In addition to the above, assigning an owner to each of the risks will allow for more focussed monitoring. The owners can discuss the risk in the meetings and ensure that things are on track or else mitigate them.

In the design phase, some key monitoring tools have to be introduced to ensure that Risks are monitored. Tools can be as simple as a checklist, process setup, SOP to regular audits (Internal and External) so as to ensure that the project is on track and the risks are monitored.

Audit is an effective mode to track risks and to mark the compliances and non-compliances of any project.

Another way of monitoring the risks is to monitor project costs. If there is under/over utilization then it means that the project needs more stringent reviews.

Also, plan for an alternative plan-b to address any failures in the original plan.

PHASE-3 – PROTOTYPE

In the prototype phase, the product is brought to test and ensure that all the bugs are addressed and the project is smooth.

At this stage, the team has to look for proof of meeting the criteria of the product specification to ensure that the risk is mitigated. A technical performance audit should be done to ensure compliance.

PHASE-4 – PROJECT CLOSURE PHASE

In the project closure phase, the stakeholders have to do a proper handover-takeover to the relevant people and ensure that risks are addressed.

PERFORMANCE APPRAISAL

Irrespective of all the systems/monitoring mechanisms implemented in the project, it takes a good amount of interest and dedication for the individual to monitor the risks. A key parameter is to include this in the individual’s appraisal system and in case of a vendor, include it as a clause in the payment so that the vendor understands the seriousness and works with us on a more serious note to ensure that the project is completed on time.

De-risking always helps the organization stay in secure hands and also ensures you have quality customers.