Create a Risk Management Plan in 6 Steps
The Six-Step Process is a common and practical approach to establishing the project risk plan. This process should not be created in a vacuum and typically involves a great deal of research and collaboration with the project team.
Step 1: Make a List
Brainstorm. Making a list of potential risks to the project should not be an analysis but a formal brainstorming session, when all ideas are captured. Steps 2 and 3 of the process allow for a vetting of these ideas. It is important that the entire team get involved in identifying threats and highlighting what can go wrong…If one or more members are left out, it is likely that some risks will remain unidentified and pose a threat to project success.
Tips for Success
- Prioritize Research: When you work with the support of an informal team, you will need to be disciplined and realize that a certain amount of research is necessary before moving forward. This may include phone calls, e-mails, office visits, or videoconferencing—whatever it takes to elicit the information you need.
- Facilitate Conversation: You typically start with the informal team members or contributors to the project and initiate a dialogue as to what might go wrong. Usually, these discussions identify other ancillary individuals who should be contacted.
Steps 2 and 3: Determine the Probability of Risk Occurrence and Negative Impact
I am combining Steps 2 and 3 because they are the prioritization factors. They assist you in vetting the list of risks. These two steps allow you to prioritize all identified threats to the project and help you determine how much time, effort, staff, and money should be devoted to preventing or mitigating each. Again, this must be accomplished not in a vacuum but with full input from team members and subject matter experts (SMEs).
Questions to Consider
- How probable is it that each risk will become a reality?
- If the risk becomes a reality, how badly will it damage the project?
- If the risk becomes reality, how will it affect the budget, schedule, resource utilization, scope of work, and so on?
To calculate the monetary impact of a risk, use the formula below. Assign each risk a probability on a scale of 1 to 10, with 1 being a low probability that the risk will occur and 10 being the highest probability that a risk will occur.
Probability x Impact (in dollars) = Budgetary Risk Impact