PROACTIVE RISK MANAGEMENT: Transform Risks into Opportunities with Proactive Risk Management

by Sandeep Y.

Issue #5

Are unanticipated risks causing your projects to go off course? You're not alone!

Unpredictable project risks derail 30% of projects globally, costing an average of $27.8 billion each year. The key to success lies in proactive risk management a strategy that turns uncertainty into resilience.

Proactive risk identification techniques

A.???? Stakeholder Analysis: The stakeholder register, and power interest grid create a symphony of influence and risk propensity during the project start phase.?The Stakeholder Impact Matrix can be used to identify stakeholder issues, which serves as the compass for proactive risk management, according to the Project Management Institute .

?B.???? STEEP/STEEPLE Analysis: The implementation of a STEEP/STEEPLE (Social, Technological, Economic, Environmental, Political, Legal, and Ethical) analysis allows project managers to thoroughly comprehend the external elements that could influence their projects and equip project managers to identify potential risks, predict challenges, and develop proactive strategies to mitigate them.

C.???? FMEA Tables and Risk Breakdown Structure: Risk Breakdown Structure (RBS) provides a road map by illuminating the complex structure of possible points of failure. FMEA tables , on the other hand, provide a graphical representation of these possible sources of failure, enabling project managers to create an approach to risk-based scheduling with thorough analysis of each risk's severity, occurrence, and mitigation controls.

D.???? Learning from the Chronicles: Past data and trends can enable project managers to gain valuable insights into recurring issues and emerging trends in the industry and develop risk mitigation strategies accordingly.

According to a PMI survey, 64% of project managers believe that lessons learned significantly contribute to project success.

Risk Assessment and Prioritization

A.???? Likelihood and Impact Matrices: Using these matrices and essential tools for identifying and prioritizing risks that require immediate attention and quantifying each risk's likelihood of occurrence and potential impact, project managers can make informed decisions that support the allocation of resources towards developing effective risk mitigation strategies.

B.???? Dependency Analysis: Project managers can efficiently allocate resources and prioritize mitigation measures to minimize potential disruptions by identifying significant risks and utilizing the critical path method (CPM). Furthermore, using influence diagrams helps to better understand how different risks are related to one another improving the efficacy of risk management techniques.

A study by McKinsey found that 70% of large-scale project failures are attributed to poor dependency management.

Proactive Mitigation Strategies

A.???? Avoidance: By? defining?the?project's?scope?to?eliminate? high-risk elements during the execution phase, project?managers?can?reduce?the?likelihood?of?failure by avoidance .

B.???? Mitigation: Administrative controls are pivotal in risk management, as they ensure the establishment of appropriate protocols and guidelines to prevent or mitigate potential risks .

C.???? Transfer & Contingency: Project managers can mitigate potential negative impacts by employing a risk transfer strategy, which involves transferring or sharing risks to third parties to diminish the project’s susceptibility to specific risks and, the establishment of contingency reserves cover the expenses and time required for risk mitigation as needed.

D.???? Risk Acceptance: Certain risks are inevitable, therefore, by vigilantly observing and accepting these unavoidable risks [SA9]?[SKY10]?, project managers can take proactive measures to address any potential challenges, which involves the routine revision and updating of contingency plans, ensuring their effectiveness in mitigating risks that have a high impact.

?This helps us to deduce that proactive risk management stands as the cornerstone for effectively navigating the intricate web of uncertainties inherent in project management offering distinct advantages, fostering increased resilience, agility, and certainty within project endeavors.

Editorial support for this issue was by Arti Sood, PMP ?, Prince2, PSM I, SAFe Agilist

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