Risk Identification Leads the Way to Project Success

Welcome to the second in the series on risk management. The first article called Risk Management is Project Management was an overview of risk management and the risk management plan. When risk is applied to project management, six processes are used in project risk management, according to A Guide to the Project Management of Knowledge, PMBOK. These processes are utilized to take advantage of the positive events and try to minimize the negative events. The processes are:

Project Management Risk Processes

1. Plan risk management

2. Identify risks

3. Perform qualitative risk analysis

4. Perform quantitative risk analysis

5. Plan risk responses

6. Monitor and control risks

Identify Risks

The second process highlighted by the Project Management Institute, PMI, is identifying risk. We will start this discussion with a project with which many people are familiar: buying a home.

Several years ago, we moved to a new area and was trying to decide whether or not to purchase a home, and if so, where should I buy. We also considered if we should buy a preexisting home or hire a builder for a new home. Of course, since we are technical and project managers, we were very systematic in our research and analysis.

We spoke with different Realtors, our coworkers, and our family of course and scoured the newspaper and Internet searching for open houses. Every option had its own set of potential risks. If we continued to rent, was this really just throwing away money, even though we did find it convenient not to have to mow the lawn or shovel snow.

Purchase House Example

If we purchased a house, could we afford it and were we buying the best house for us and our family.

We approached it like any other project, with interviewing people, note collecting, collating, and interpreting the data. After reviewing our expenses and income and examining the tax advantages, we determined that purchasing a house would be a moderate financial risk for us.

We narrowed down our search to specific neighborhoods near to our business that esthetically appealed to us and our family then made a spreadsheet to enter data. The main points are illustrated below.

 

 

 

 

From our research and analysis, we found and purchased our dream home. We reduced risk by first identifying them. All of the items in the spreadsheet held a certain degree of risk. Can we afford this house? Is it convenient to us for work or other necessities? We had to reduce future risk by considering resale value in the equation, so we had to take into account location and features that future potential buyers might find attractive.

How Does This Story Translate to Risk Management in My Projects?

It begins the same, with identifying risk and compiling information. Write down information as you proceed with the risk identification process because the output of all of this information will be a risk identification matrix. The matrix is a dynamic document, always evolving because you will be constantly reviewing and making modifications. During the risk identification process, you need not complete the matrix other than the risk identification field. The project impact, action, responsible party, etc, comes at a later date.