Monitoring and controlling risk is a central part of project management
Risk management has always been a core part of project management, but the importance of monitoring risk has been increasingly acknowledged in recent times. Risk monitoring shouldn’t be an afterthought which may be undertaken if there is enough time available to do so; instead, it’s a central principle which is key to project success.
While it’s impossible to completely eradicate risk from a project, it is possible to introduce a clear and robust risk monitoring strategy in order to identify and minimize the impact of those risks. Project managers want to be aware of potential risks to delivery and have a strategy for dealing with those risks; a risk monitoring framework helps achieve this.
The implications of not monitoring risk are substantial
Risk can be identified at various levels of a project, from the people delivering on the ground all the way up to the Project Governance Board. While identifying risk is a crucial step in the process, without an ongoing monitoring framework it’s impossible for the project manager to track and manage activities to treat those risks.
Uncontrolled risk can cause real problems in a project environment. Unforeseen events can introduce slippage into the schedule, potentially delaying project completion. Cost overruns become more likely when risks aren’t controlled, plus customer satisfaction can be negatively impacted if deadlines are missed and promised activities aren’t completed. Company reputation can be damaged by the project team operating blind and having to retrospectively manage problems after they’ve occurred.
Recent events have increased project risks
No project occurs in a vacuum, and recent global trends have introduced new risks that need to be taken into account by project teams.
The move towards hybrid working, while in many ways positive for employees who value more flexibility, creates a challenge for project managers trying to coordinate a disparate workforce. Similarly, the scarcity and price increase of materials, likely to be a continuing trend for the construction industry, have meant that schedules have been put under more strain than ever before.
The core principles of risk monitoring
Risk monitoring can be seen as a cyclical process, where each function may be repeated several times during a project lifecycle:
- Risk identification
A key task for project managers is to identify all potential risks to a project, including where they stem from. Being able to articulate the nature of risk is the critical first step towards controlling it, and the act of scanning for risks helps set the project in context.
Risk identification should be a part of ongoing conversations with the project team, to ensure that emerging risks are not missed. Risks should be recorded in the risk register and made available to everyone involved in the project.
- Risk evaluation
Project managers are required to evaluate the identified project risks. This means making an assessment of the likelihood of an event occurring along with the potential impact of the event, to understand how much of a risk the event poses to the project.
Events can be categorized as high, medium or low probability of occurring, alongside an impact rating of high, medium or low. Multiplying the two ratings together in an Impact-Probabilty Matrix will produce a set of risk scores, pointing to the risks which need to be treated.
- Risk control
Once a significant risk has been identified, a risk response must be identified and recorded in the risk register. The aim is to either eliminate the risk, lower the probability of occurrence, or lower the impact of the risk on the project objectives.
The aim is to control the risk and reduce the risk score calculated in the evaluation step. Ideally the risk would be eliminated entirely, but this is often unrealistic, and risk control is successful if a plan exists to deal with an event which will lessen the impact and probability of it occurring.
- Risk monitoring
Risk monitoring ties these first three processes together. As a project evolves new risks will appear, and it’s important that these are identified and controlled. Therefore, the most important principle of risk management is the ongoing, active monitoring of risks to ensure existing ones are appropriately controlled and new ones are identified and dealt with appropriately.
Without risk monitoring, risk management is impossible. Ongoing reporting of risks and assessment of the efficacy of risk controls is a core part of project management.
Risk monitoring helps achieve project success.
Managing risk is one of the most challenging parts of project management, but robust risk monitoring practices give project managers a head-start. Monitoring risk on an ongoing basis helps eliminate unpleasant surprises and can make project management a much less stressful process!
At DRMcNatty, we have decades of experience helping project managers analyze the risks and opportunities associated with their projects. Get in touch today for a conversation about how understanding and monitoring your risks can help you achieve project success.