Blog Post Image

Risk Management – Advantages – Feedback Required

Paul Naybour Paul Naybour

Published: 17th February 2016

List and describe 5 benefits to an organisation of adopting a formal risk management process

  • Acts as a mechanism for audit
  • Acts as a means for continuous improvement
  • Improved mitigation planning
  • Provide evidence for contingency budget
  • Ensures that all risks are being actively managed and decision making at appropriate level
The risk management process is described as part of the risk
management plan which is part of the PMP, and signed off and improved at the
definition stage. The project management office will provide internal project
assurance that the process is being followed during the project lifecycle.
External audit may undertake a spot check to ensure this is the case. By undertaking
audit provides re assurance to the Project sponsor and the organisation that
risks are being proactively managed by the project which builds trust with the
project sponsor.
The risk assessment process ensures that all risks are
captured and an appropriate mitigation plan is put in place during the project.
They can however also act as a valuable source of information and provide
potential solutions to other projects. For example a project used rollout
mobile phones across the organisation may have identified weaknesses in the
insurance claims process. By Reviewing risk logs would mean that a future
project to rollout mobile tablets should not suffer the same risks of non
payout for insurance claims, since through continuous improvement an effective
mitigation plan was established and so the organisation would not have the same
risks with the new project.
The process of identification and assessment of risks
ensures that their probability, impact and proximity are all scored to give an
overall risk assessment score. The project sponsor will be able to view the
risks in rank order of risk and ensure that mitigation plans are more
extensively detailed for those risks with a higher score. By being disciplined
about risk management ensures that threat based risks impact on the
organisation are minimised and opportunity based risks are maximised and
exploited by the organisation.
The project sponsor may need to seek additional contingency
funding identified as part of the mitigation planning. Its provides evidence to
the project sponsor to be able to confidently ask for additional funding from
the board, knowing the risks relevant importance and that all options have been
considered. Without effective risk management there is less justification and
evidence for contingency spend to be approved causing risks to escalate.
The risk management process ensures that risks are managed
and decisions made at the appropriate level of authority. It provides
protection to the project that risks are managed and escalated accordingly. For
the organisation this can ensure that the risks do not escalate and become an
organisational risk which can damage the reputation and viability of the
organisation (for example RBS which needed to be bailed out).