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Project Risk Management Methods Part 2

Paul Naybour Paul Naybour

Published: 31st March 2011

The first part of this article listed the five main methods for managing risk within a project. This article will now discuss in more detail the advantages and disadvantages of those five methods in order to give you an indication of which method(s) might be most appropriate for your own project. For all of these methods there is a range of software tools available but your own organisation may already have a preferred tool. Whichever tool you use, they will all cover the same essential elements of each risk management technique.
1. Risk Assessment based on the previous experience of the project manager
A project manager who has successfully delivered a number of projects in a similar field has a wealth of knowledge about managing risks within a project, which may or may not be documented. So there is great advantage to certain project managers bringing their experience to new projects and this personal knowledge and skills should never be underestimated as a factor in the success of projects.
However, it relies on good, experienced project managers being available for a project, which is not always the case. The success of this approach also relies on projects being broadly similar. The experience gained managing risks on one project might not be relevant to another project with a completely different set of challenges and complexities.
2. Reference to documented risks that occurred in previous projects
This method can work well if an organisation has a rigorous approach to documenting past mistakes. It ensures that the same mistakes are not made over and over again and instils an awareness of the most common risks in certain types of projects.
However, in practise post-project reviews and documentation is often a rushed process and not as thorough as it could be. So the documentation on which a project manager of a new project might be relying in order to manage risks may be deficient. Furthermore, such documents only list mistakes that have been made before and can give a false sense of security which might mean that not enough effort is given to considering or predicting other sources of risk.

3. Brainstorming Sessions

Brainstorming sessions are a very effective way to view a project and its potential risks from many angles. This, of course, requires bringing together a group of people with a wide range of experience and skills who all have some interest in the success of the project. Such a group will bring different perspectives to the project and in the very best cases will highlight all possible problems so that all risks can be anticipated. But this ideal scenario is very dependent on the strength of the group involved in the brainstorming and it is not always easy to get the people with the right skills to attend such sessions.
One reliable way to gain as much information as possible in these sessions is to stick to a predetermined time-limit and to stay entirely focussed on the topic at hand.
4. SWOT Analysis
SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats and is a useful method for assessing a project in order to determine what the risks might be and the best way to manage those risks. SWOT Analysis takes the form of a standard set of questions. The answers to these questions provide the valuable information necessary to effectively manage risk within the project.
Typical questions for revealing the Strengths within the project might be:
How experienced is the project manager?
How experienced is the project team?
Weaknesses can be elicited by questions such as:
Does the project team have all the necessary skills or training?
Is the project schedule realistic?
Opportunities can be highlighted by questions such as:
What are the competitors’ weaknesses?
Have any recent technical advances been made?
And finally, posing questions that might reveal potential threats:
Are there any budget constraints?
What are the competitors’ strengths?
5. Probability Modelling
Simple probability modelling can be used effectively to predict the likelihood of a project exceeding either its budget or its delivery date, or both. And where a target is exceeded, it analyses the impact depending on how much the target has been exceeded. If a time over-run is a predicted risk, then it may or may not occur, but if it does occur the impact of it is very much dependent on how much the over-run is and whether the consequences are then much greater. For example there may be huge consequences if a project exceeds its deadline by a relatively small amount but this takes the completion date of the project into a new financial year.
To perform this type of modelling there are a range of inexpensive software tools which will help you to show graphically many possible outcomes related to a risk and how likely they are to occur. The graphical displays that these tools provide make it much easier to visualise the range of possibilities and to make judgements on how best to deal with individual risks.
After the risks within a project have been identified and categorised they can then be evaluated by using a risk breakdown structure, which in it’s simplest sense is a chart for organising and communicating risks as part of the project management process. Risks can be categorised into many levels on a risk breakdown structure which can also help to identify risk dependencies.

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