10 Easy Rules to Reduce Risks on Projects (2023)

10 Easy Rules to Reduce Risks on Projects (1)

  • Michael Stanleigh
  • Project Audit, Project Management, Quality Management, Uncategorized

Managing risks on projects is well worth the effort and keeps you in control of your project.

Risk Management is a process for identifying, analyzing and responding to risk factors throughout the life of a project in order to provide a rational basis for decision making in regards to all risks. Proper risk management implies the control of possible future events, and is proactive rather than reactive; so it is embedded in to the project planning process. It will reduce not only the likelihood of an event occurring, but also the magnitude of its impact.

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The intention of the Risk Management Process is to reduce management by crisis. While there may always be some things that will occur on your project that you may not have anticipated you can manage most of these, through sound risk management rather than gut reaction. Essentially, the Risk Management Process is a quality problem- solving process. It uses quality and assessment tools to determine and prioritize risks for assessment.

Importance of Project Risk Management

Projects often get started in the right direction but then get off track. For example, project managers will spend time with their teams to develop a clear scope and detailed plan. Then something happens; something unexpected—a major disaster strikes. The project manager and team move quickly into their reactive mode – they manage this risk on the basis of their experiences and best judgment but they have no opportunity to test it out and they hope that it’ll be okay, but they do not know for sure. This is not risk management – it is management by crisis. Here are ten (10)rules to help you manage project risk effectively.

  1. Identify the risks early on in your project.
    • Review the lists of possible risk sources as well as the project team’s experiences and knowledge.
    • Brainstorm all potential risks.
    • Brainstorm all missed opportunities if project is not completed.
    • Make clear who is responsible for what risk.
  2. Communicate about risks
    • Pay attention to risk communication and solicit input at team meetings to ensure that your team perceives that risk management is important for the project.
    • Focus your communication efforts with the project sponsor or principal on the big risks and make sure you don’t surprise the boss or the customer.
    • Make sure that the sponsor makes decisions on the top risks, because some of them usually exceed the mandate of the project manager.
  3. Consider opportunities as well as threats when assessing risks.
    • While risks often have a negative connotation of being harmful to projects, there are also “opportunities” or positive risks that may be highly beneficial to your project and organization. Make sure you create time to deal with the opportunities in your project. Chances are that your team will identify a couple of opportunities with a high pay-off that may not require a big investment in time or resources. These will make your project faster, better and more profitable.
  4. Prioritize the risks
    • Some risks have a higher impact and probability than others. Therefore, spend time on the risks that cause the biggest losses and gains. To do so, create or use an evaluation instrument to categorize and prioritize risks.
    • The number of risks you identify usually exceeds the time capacity of the project team to analyze and develop contingencies. Therefore, the process of prioritization helps the project team to manage those risks that have both a high impact and a high probability of occurrence.
  5. Fully understand the reason and impact of the risks.
    • Traditional problem solving often moves from problem identification to problem solution. However, before trying to determine how best to manage risks, the project team must identify the root causes of the identified risks.
    • Risk occurs at different levels. If you want to understand a risk at an individual level, think about the effect that it has and the causes that can make it happen. The project team will want to ask questions including:
      • What would cause each risk?
      • How will each risk impact the project? (i.e., costs? lead time? product quality? total project?)
    • The information you gather in a risk analysis will provide valuable insights in your project and the necessary input to find effective responses to optimize the risks.
  6. Develop responses to the risks.
    • Completing a risk response plan adds value to your project because you prevent a threat occurring or minimize the negative effects. To complete an assessment of each risk you will need to identify:
      • What can be done to reduce the likelihood of each risk?
      • What can be done to manage each risk, should it occur?
      • What can be done to ensure opportunities are not missed?
  7. Develop the preventative measure tasks for each risk.
    • It’s time to think about how to prevent a risk from occurring or reducing the likelihood for it to occur. To do this, convert into tasks, those ideas that you had identified that would help to reduce or eliminate risk likelihood.
  8. Develop the contingency plan for each risk.
    • Should a risk occur, it’s important to have a contingency plan ready. Therefore, should the risk occur, you can quickly put these plans into action, thereby reducing the need to manage the risk by crisis.
  9. Record and register project risks.
    • Maintaining a risk log enables you to view progress and make sure that you won’t forget a risk or two. It’s also a communication tool to inform both your team members, as well as stakeholders, about what is going on.
    • If you record project risks and the effective responses you have implemented, you will be creating a track record that no one can deny, even if a risk happens that derails the project.
  10. Track risks and their associated tasks.
    • Tracking tasks is a day-to-day job for each project manager. Integrating risk tasks into that daily routine is the easiest solution. You may carry out risk tasks to identify or analyze risks or to generate, select and implement responses. The daily effort of integrating risk tasks keeps your project focused on the current situation of risks and helps you stay on top of their relative importance.

Summary

The benefit of risk management in projects is huge because the outcome of project failure is wasted dollars that steal investor profits and have a negative impact on the organization’s bottom-line. Risk assessments allow you to deal with uncertain project events in a proactive manner. This allows you to deliver your project on time, on budget and with quality results.

Complete your risk assessment early on in the project’s execution and continuously (i.e.; every 2 to 3 months), throughout the project’s lifecycle. It will increase your project’s success likelihood. And, whenever possible, measure the effects of your risk management efforts and continuously implement improvements to make it even better.

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Michael Stanleigh

Michael Stanleigh, CMC, CSP, CSM is the CEO of Business Improvement Architects. He works with leaders and their teams around the world to improve organizational performance by helping them to define their strategic direction, increase leadership performance, create cultures that drive innovation and improve project and quality management. Michael’s experience spans public and private sector organizations in over 20 different countries. He also delivers presentations to businesses and conferences throughout the world. In addition to his consulting practice and global speaking he has been featured and published in over 500 different magazines and industry publications.

For more information about this article you may contact Michael Stanleigh at mstanleigh@bia.ca

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FAQs

10 Easy Rules to Reduce Risks on Projects? ›

10 Easy Rules to Reduce Risks on Projects
  • Identify the risks early on in your project. ...
  • Communicate about risks. ...
  • Consider opportunities as well as threats when assessing risks. ...
  • Prioritize the risks. ...
  • Fully understand the reason and impact of the risks. ...
  • Develop responses to the risks.
Oct 5, 2016

What are the 10 golden rules for project risk management? ›

Project Risk Management: 10 Golden Rules Every Project Manager Should Follow
  • Have a Risk Management Strategy. ...
  • Keep an Eye Out For Risks from the Start. ...
  • Involve Team Members. ...
  • Do a SWOT Analysis. ...
  • Appoint Risk Owners. ...
  • Prioritize Risks. ...
  • Conduct Detailed Risk Analysis. ...
  • Implement Risk Response.
Oct 21, 2019

How can you reduce risk on your projects? ›

There are 4 essential steps to reducing risk: documenting, prioritising, avoiding and mitigating.
  1. Documenting. Document each risk in detail, including their potential impacts and possible responses to mitigate the risk. ...
  2. Prioritising. ...
  3. Avoiding. ...
  4. Mitigating.
Feb 22, 2022

How can you reduce risk explain with example? ›

Risk can be reduced in 2 ways—through loss prevention and control. Examples of risk reduction are medical care, fire departments, night security guards, sprinkler systems, burglar alarms—attempts to deal with risk by preventing the loss or reducing the chance that it will occur.

What is the rule of risk management? ›

The six rules of risk management are: Don't retain more than you can afford to lose. Example: If your business cannot afford a $100,000 loss, then going without employment practices liability insurance is a bad decision.

What is the first rule of risk management? ›

Knowing what you're doing can help mitigate, or alleviate, the risk but it rarely removes all of the risk. Still, it's important enough that we could say the first rule of risk management is: Know what you are doing.

What are the 5 methods used to manage treat risks? ›

The basic methods for risk management—avoidance, retention, sharing, transferring, and loss prevention and reduction—can apply to all facets of an individual's life and can pay off in the long run. Here's a look at these five methods and how they can apply to the management of health risks.

What are the 3 types of project risk? ›

Project risk is the potential of a project to fail. There are three main types of project risks: cost, schedule, and performance.

How do you manage risk in a project interview question? ›

Good answers to this question are:

Assess the impact if the risk occurs. Identify a mitigating action. Choose the most appropriate response to the risk e.g. transfer, accept, reduce, contingency. Ensure high level risks are escalated as required.

What are the 4 ways to manage risk? ›

There are four primary ways to handle risk in the professional world, no matter the industry, which include:
  • Avoid risk.
  • Reduce or mitigate risk.
  • Transfer risk.
  • Accept risk.
Sep 8, 2020

Why do we need to reduce risk? ›

Disaster risk reduction (DRR) protects the lives and livelihoods of communities and individuals who are most vulnerable to disasters or emergencies. Whether the crisis is caused by nature or humans (or a combination of both), DRR limits its negative impact on those who stand to lose the most.

What is a means to reduce risk? ›

Risk Reduction — measures to reduce the frequency or severity of losses, also known as loss control. May include engineering, fire protection, safety inspections, or claims management.

What are the 11 principles of risk management? ›

Here are 11 principles to consider for your business risk management plan:
  • Create and protect value. ...
  • Be integral to your process. ...
  • Be part of decision making. ...
  • Explicitly address uncertainty. ...
  • Be systematic, structured and timely. ...
  • Be based on the best available information. ...
  • Be tailored.

What is the 14 principles of management? ›

14 principles of Management are statements that are based on a fundamental truth. These principles of management serve as a guideline for decision-making and management actions. They are drawn up by means of observations and analyses of events that managers encounter in practice.

What are the 9 principles of project management? ›

Here are the nine principles of project management:
  • Formal project management structure.
  • Invested and engaged project sponsor.
  • Clear and objective goals and outcomes.
  • Documented roles and responsibilities.
  • Strong change management.
  • Risk management.
  • Mature value delivery capabilities.
  • Performance management baseline.

What are the 3 rules of risks? ›

This rule guides you to accept risk if you can control a significant portion of the outcome.
...
Decision-Making and The Three Rules of Risk Management
  • Don't risk more than you can afford to lose. ...
  • Never risk a lot for a little. ...
  • In general, take the risk if you can affect the outcome.
Jul 24, 2008

How do you play risk Basic? ›

How To Play Risk - YouTube

What are the six steps of risk management? ›

  1. Step 1: Hazard identification. This is the process of examining each work area and work task for the purpose of identifying all the hazards which are “inherent in the job”. ...
  2. Step 2: Risk identification.
  3. Step 3: Risk assessment.
  4. Step 4: Risk control. ...
  5. Step 5: Documenting the process. ...
  6. Step 6: Monitoring and reviewing.

What are the 8 risk categories? ›

Risks Associated With International Activities

3 The OCC has defined eight categories of risk for bank supervision purposes: credit, interest rate, liquidity, price, operational, compliance, strategic, and reputation. These categories are not mutually exclusive.

What are key project risks? ›

A likely adverse event beyond the control of the project management is a potential risk. Such risks manifest in various types and forms, including terrorism, storms, floods, vandalism, earthquakes and civil unrest. A project may stall or discontinue when such events occur.

What are the 4 categories of risk? ›

The main four types of risk are:
  • strategic risk - eg a competitor coming on to the market.
  • compliance and regulatory risk - eg introduction of new rules or legislation.
  • financial risk - eg interest rate rise on your business loan or a non-paying customer.
  • operational risk - eg the breakdown or theft of key equipment.

How do you manage risk answer? ›

How to PASS a Risk Management Interview! - YouTube

How do you answer a risk question? ›

TELL ME ABOUT A TIME WHEN YOU TOOK A RISK! (2 ... - YouTube

How do you answer a risk management question? ›

As you're preparing for your job interview, think about your answers to these inquiries:
  1. Discuss your experience in presenting risk assessments and reports. ...
  2. Outline how you maintain attention to detail and how it's helped you solve a problem. ...
  3. Analyze a risk process that you've worked with before.

What is a risk strategy? ›

A risk management strategy is a structured approach to addressing risks, and can be used in companies of all sizes and across any industry. Risk management is best understood not as a series of steps, but as a cyclical process in which new and ongoing risks are continually identified, assessed, managed, and monitored.

Which is an example of a risk? ›

If the man chooses to move his investments to those in which he could possibly lose his money, he is a taking a risk. A gambler decides to take all of his winnings from the night and attempt a bet of "double or nothing." The gambler's choice is a risk in that he could lose all that he won in one bet.

What is risk reduction strategy? ›

Risk reduction definition: A risk becomes less severe through actions taken to prevent or minimise its impact. Risk reduction is a common strategy when it comes to risk treatment. It is sometimes known as lowering risk.

What are risk standards? ›

What are Risk management standards? Risk Management Standards set out a specific set of strategic processes which start with the overall aspirations and objectives of an organisation, and intend to help to identify risks and promote the mitigation of risks through best practice.

What are the six functions of management? ›

Planning, organizing, directing, coordinating, and controlling. Fayol distinguishes between the principles and elements of management.

What are the basic principles of management? ›

Five principles of management are as follows:
  • Division of work.
  • Unity of Command.
  • Subordination of individual interest.
  • Unity of Direction.
  • Remuneration.

What are management roles? ›

A role is a set of behavioral expectations, or a set of activities that a person is expected to perform. Managers' roles fall into three basic categories: informational roles, interpersonal roles, and decisional roles.

What is the golden rule of project management? ›

Rule 1: Thou shall gain consensus on the project outcome. Rule 2: Thou shall build the best team possible. Rule 3: Thou shall develop a comprehensive, viable plan and keep it up-to-date. Rule 4: Thou shall determine how much activity you really need to get all things done.

What are the three rules of risk management? ›

Decision-Making and The Three Rules of Risk Management
  • Don't risk more than you can afford to lose. Good advice for corporate leaders, mid-level managers and everyone in their personal lives. ...
  • Never risk a lot for a little. ...
  • In general, take the risk if you can affect the outcome.
Jul 24, 2008

What is WIP for a project manager? ›

Work-in-Process (WIP) is not just the work you are working on. It is anything that has been started and not completed. This means once you have started work on a Minimum Business Increment (MBI), epic or feature, it is WIP until it is released. Managing WIP is a recurring process.

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