Project Risk Management – Part 2
Step three – risk response
For each risk, the risk owner must establish a level of mitigation to the satisfaction of the project manager. Factors causing the risk must be understood to help determine the appropriate mitigation actions, all of which are recorded within the risk register.
If effective mitigations cannot be identified to control the risk, the medications need to be sought to reduce the consequences to an acceptable level. The diagram below summarises such risk response options:
Step four – risk review
The review process allows a final check of the key risks by the project manager, and this review and validation comprises the process by which the project manager except accountability for the risk information.
The project manager will undertake a review of the risk log regularly throughout the life cycle of the project.
Such a review consists of the following actions:
- A detailed review of the most critical risks and opportunities. These may be those risks being to be “red” risks in accordance with the severity rating score
- Checking that the delegated response plans have been implemented, progressed or completed
- Checking any existing items scores increased or decreased due to changes in likelihood or impacts
- Checking if additional mitigation measures are required
- Checking if any existing risks and opportunities can be closed
- Check and agree whether any drawdown of management reserve is required
- Review the need for any focus workshops on any of the matters raised in the review
Step five – risk reporting
Reporting will be based on the day to contained within the risk log, which will be updated and reviewed at each reporting cycle. As well as the information illustrated, additional fields may be used to capture tracking data. This will provide risk management information to support reporting requirements.
Step six – risk drawdown
Risk drawdown is the movement of budget in the risk pot, usually into the performance measurement baseline (PMB). The project should set guidelines for the drawdown of risk money and clearly identified authority required to do so.
Be aware that the contractual situation and budget ownership will dictate how this is dealt with, and the following are suggested ways of during down the risk budget:
When risks are mitigated
When mitigation plans are put in place and involve incurring cost, and appropriate some may be drawn down from the management reserve and attributed to new or existing activities in the PMB. This is effectively an addition of scope to the activity as well as budget.
When the risks are realized
When risks are realised that involve incurring cost, and appropriate some may be drawn down from the manage and reserve and attributed to appropriate actions in the PMB. This is effectively an addition of scope to the activity as well as budget.
When risks are closed
When rest are closed, their impact upon the risk exposure will clearly be reflected. However, depending on the contractual situation, risk allowances may be maintained. There are a number of options for dealing with this allowance:
Where risk exposure is greater than the allowance, retain the allowance in the risk register, reallocating to new or emerging risks if appropriate
Where risk allowances greater than exposure, in a portion of risk allowance may be released to “profit”
Step seven – when opportunities are realized
When opportunities are realized, the budget will stay in the project. There are a number of options that may be appropriate, and the project team must consider the following:
Move the budget from relevant activities to the “management reserve”. In some cases, the realization of an opportunity may need to be balanced by the introduction of a new risk. For example, the relaxation of strict working patterns would be an opportunity to complete work faster and more cheaply, that the risk that the relaxation conditions may not continue in future should be captured.
Do nothing – this would result in a positive variance in cost or schedule. Care should be taken that this positive value does not mask poor performance
If funds are used to pay for a mitigation to realise opportunity, sufficient value to colours expense would be allocated as appropriate, and then made also be a release of budget from the baseline to reflect cost benefit of the opportunity
Step Eight – documenting changes in the risk budget
All movements in the risk budget must be documented for control purposes.
Also, records should be kept of the contingency allowances and the lessons learned, for future projects