Risk management is a process that involves making and implementing decisions to reduce the likelihood of negative project outcomes and minimize possible losses if they cannot be avoided. This is an important aspect of every team’s work, so in this article we will discuss the following:
- Risk management culture – why working with risks is essential for the successful implementation of a project;
- Risk management tools and techniques – what is used in communicating with the team about existing risks and managing them;
- The role of the team in risk management – how each team member can contribute to identifying, assessing, and minimizing risks;
- Risk management in Agile projects – whether risk management exists at all in Agile projects, and whether effective risk management can help achieve success in such projects.
Risk management culture
Before we start talking about the culture of risk management, it is worthwhile to dwell on the question of what risks are and what they are.
Risk description format
Not everyone knows about this, but there is a specific format for describing risks, i.e. it’s not enough to just write “PM quit” or “No PO on the project”. You need to follow a clear structure defined by international standards:
Everyone around us is talking about Data driven decisions – making decisions based on data. However, unfortunately, Risk driven decisions are much less frequently mentioned, although they are actually very important. It is better to understand in advance what can potentially happen, with what probability, and decide what to do in each situation.
Why does a team need risk management?
Of course, you can motivate the implementation of risk management with a simple argument that the team has already had enough failures, so they can no longer afford to work on projects without taking risks into account. However, there are three clear reasons why this practice is advisable:
- Making informed decisions. Managers often make decisions intuitively. Sometimes it works, sometimes intuition is supplemented by data, facts, and figures from analytical studies. However, the most informed decisions are made on the basis of risks;
- Project management that brings value to the client and the business. It is logical that any project should provide value, and for this, the team must fulfill its goals. Given the fact that risks directly affect the achievement of goals, they need to be managed correctly;
- Protecting company resources, stakeholders, and customers from negative events. If you analyze the risks in advance and draw up a so-called “Plan B”, you will potentially spend less than if some unforeseen situation occurs.