The Importance of Risk Management

May 31, 2023 | Project Management | 0 comments

By Sheldon Bryant

Risk management is a profound part of project management. Without anticipating and planning for risk, the odds that a project doesn’t go according to plan or outright fails go up exponentially. By accounting for risk and natural human tendencies, the project manager increases the chances of success.

Risk Management is Not Natural

Risk management is not a natural human tendency, and that fact needs to be acknowledged before any discussion of management can commence. People naturally want to take the path of least resistance, and the steps needed to manage risk can sometimes seem like unnecessary hindrances. That’s part of what makes it so vital – the path of least resistance can be alluring, but it can also be the one that takes a project off the proverbial cliff.

Risk is Hard to Talk About

Risk is difficult for people to talk about because human beings naturally tend to overestimate the degree to which they have control over situations and events. Confirmation bias compounds this problem – if something went well before, then most people see little reason to consider why it may not go the same way in the future. Talking about risk can thus make it seem like people are being talked down to or in some way treated like children. This isn’t the case. Risk management, when implemented appropriately, should only ever help the project and the employees succeed.

Managing Internal Risk

Internal risks arise from within the organization and unlike random chance, are far more within the project manager’s control. Examples can include illegal activity, inefficient processes, unethical behavior, breakdowns in operational processes, or unexpected absences. Managing internal risks not only helps to ensure project success – it also helps to maintain a peaceful and pleasant work environment.

Controlling External Risk

External risks are largely outside of the project manager’s control and cannot be managed so much as they can be controlled. Examples of external risks include shipping/delivery delays, or other unforeseen events outside of the organization. These risks can be controlled with contingency plans, backup sourcing, etc.

Process of Risk Management

The process of developing a plan for risk management may seem overwhelming, but if you know and understand the best steps to take, it’s well worth your time. First, develop a tailored plan. This should include the roles and responsibilities to carry out this plan as well as a guide to carry out the activities of the plan. Then, you must identify the potential risks, analyze the risks, then determine the potential impact of the risks. Together, these steps can help create a risk management plan that brings your project success.

Project planning and risk management go hand in hand. At the TLP Consulting Group, we help our clients to develop comprehensive project plans with risk management built into their very framework. The plans we help our clients develop help them to execute their projects with as few hiccups and interruptions as possible, with backup plans should something go wrong. Contact us today to see how we can help!

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