Risk Identification and Logging
A Project Risk is a possible future event or situation that, if it becomes a reality, is likely to have an adverse impact on project delivery according to the Plan, Budget, or Business Case.
Why Do You Need to Manage Project Risks?
Managing a project is concerned with managing through uncertainty towards defined goals. Projects need –
However, when dealing with change and innovation, things do not always turn out as expected and can affect one or more of the areas above. Establish procedures to identify the risks that might throw the project off-course and identify measures to avoid, minimise, or otherwise deal with them.
When Do You Need to Manage Project Risks?
Risk management is a continuous process that should start before the project. Those making decisions about which projects to finance need a clear understanding of risks and pitfalls. A Risk Log should be initiated as part of any project proposal and once created, should exist until a project has been completed.
How Might You go about Identifying Project Risks?
There are a number of sources for identifying risks including:
Project Risk Log
You can set up a Project Risks Log and procedures using Microsoft Excel or any spreadsheet software. Such a Log is best kept ‘read only’ on a Network, making it accessible to Stakeholders.
Typical Risk Log Headings
Establish criteria and ratings for describing the potential impact and likelihood of each risk. Criteria should be consistent across the project and other projects.
Column A – Risk number (A unique identifier for each risk within the project)
Column B – Risk Type – Does this risk affect only the project, a program or the business?
Column C – Date Raised
Column D – Raised By (Name)
Column E – Risk Description and Potential Consequences. A complete description is essential. Entries have to stand up to any ‘So what?’ analysis. A useful phrase when describing the potential impact of a risk is ‘which would mean that ……’ to focus the attention of those reading the Log.
Column F – Likelihood – Suggested Numeric Ratings
Column G – Impact – Suggested ratings
Column H – Overall Risk Rating
A numeric indicator of the potential threat from this risk, easily calculated by hand or a spreadsheet formula, typically the product of the likelihood factor and the impact factor. The higher overall rating, the more attention needed to avoid this risk or to minimise the chance of it becoming a reality. Using the factors above, Overall Ratings of 24 would be at the ‘sleepless night’ end of the scale.
Column J – Action Type
Column K – Countermeasures
Countermeasures are pre-defined actions to prevent or reduce the likelihood of something happening, or reduce the impact if it does happen. Each Countermeasure needs to identify what actions should be taken, by whom and at what stage.
Optional Risk Ranking Methods
A number of organizations use a RAG system (Red, Amber, Green)
A Red risk is a potential ‘showstopper’
Amber presents a significant threat
A Green risk is recorded but should not cause loss of sleep unless it worsens.
‘Red’ Risks need careful daily monitoring.
You may prefer to use a simple, matrix based on the following judgments: –
Likelihood / Probability
Concentrate on the ‘High / High’ Risks on a daily basis and track others regularly.
Projects encounter many risks, some of which cannot be foreseen or forestalled. Those that can be anticipated need to be, and one of the key skills of a Project Manager should be that of helping stakeholders and the project team to identify, articulate and record project risks so that they can be effectively analysed and monitored and their negative consequences avoided or minimised.