Proactive Risk Management: Ensuring Project Success
Highlights
Post-mortems are a standard project management practice, but implementing a strategy of proactive risk management is even more valuable.
Proactive risk management involves identifying, assessing, and prioritizing risks and taking steps to mitigate their impact.
Prime 8 consultants have years of experience with risk analysis and management that any business can use to drive project success.
Projects that have many moving parts inevitably include many risks — numerous opportunities for outages and delays, leading to missed deadlines, underperformance on key business goals, costly overruns, and more.
Project post-mortems are essential to business risk mitigation — a look back at how and why some risks became crippling and others didn’t is a key part of project management. But so is proactive risk management. Getting out in front of risks — analyzing and managing what could happen — leads to better project outcomes and also strengthens companies.
Let’s explore how Prime 8's approach to proactive risk management can lead to greater project and operational success.
WHAT IS PROACTIVE RISK MANAGEMENT
Proactive risk management is a process for implementing a thorough and ongoing operational assessment of any project. It includes:
Identifying, assessing, and prioritizing risks
For those risks that are believed to have serious, negative consequences, taking the appropriate steps to minimize that impact
Ensuring all stakeholders, including executive, receive clear communication about identified risks
Making use of tools such as risk matrices and business intelligence (BI) dashboards
OPERATIONAL ASSESSMENT
Ideally, proactive risk assessment starts early in a project lifecycle with a thorough operational assessment of the entire undertaking — making full use of risk identification frameworks, pinpointing objectives, and making sure the resources needed to achieve those objectives are fully available.
Questions to consider include:
Do the people charged with carrying out the project have the right skill sets?
Could employee turnover — a key team member leaving — cause a skills outage?
Are the project’s underlying technologies and processes up to the job? Proven? Secure? Up to date?
Is the project adequately funded? Could changing economic conditions or market volatility impact that?
What about external risks, such as a natural disaster or social unrest?
Finally, is the project helping to bring about a sustainable business solution to the challenge at hand?
These are just a few highlights of any project risk management operational assessment. There is a long list of factors to consider, and they should be regularly revisited during the course of the project.
RISK EVALUATION AND PRIORITIZATION
Once risks have been identified, they need to be evaluated and prioritized:
What’s the actual likelihood that a potential risk becomes reality?
What are the most significant risks?
Which risks require immediate attention?
For this, we often make use of common risk analysis techniques such as risk impact/probability charts or a risk matrix — visual depictions that show the relationship between the likelihood for different types of problems or risks to actually occur and the potential impact.
Sample risk probability and impact chart
This helps determine if a risk would be catastrophic for the project or activity if it were to occur.
MANAGING RISK
Once risks have been identified, assessed, and prioritized, initial decisions can be made on managing them and reducing the probability or impact.
These decisions might include:
Changing the project plan to eliminate the risk or protect project objectives from its impact.
Addressing skill shortages through training or recruitment of new team members.
Implementing new systems if technology is identified as an issue.
Seeing if additional funds can be allocated if financing is an issue.
RISK MISCALCULATION
Not every risk needs to be addressed. Acknowledging the risk but deciding not to take any action is a valid response, especially for those that are low probability and pose a minimal impact. Distractions caused by smaller issues that are unlikely to have significant impact often cause organizations to miscalculate risks.
A major study of 500,000 operational losses in banks showed that the incidents that fit a small risk profile, while occurring with much more frequency (61%), were the least damaging, accounting for just 6% of total losses. The real damage came from the largest, rarest incidents: Each year, the top 0.3% of incidents cause on average 63% of the total losses.
CLEARLY COMMUNICATING WITH EXECUTIVE STAKEHOLDERS
Research has shown that one of the top reasons projects fail to meet their original business goals is due to the lack of an actively engaged executive stakeholder. According to the Project Management Institute, one in four organizations (26%) report that inadequate sponsor involvement is the primary cause of failed projects. The culprit is often lack of clear communication.
For example, after-the-fact analyses of the 2008 financial crisis found that top executives at banks were briefed on the risks of their subprime/housing related exposures, but the reports were overly complex, used outdated data, or were not made available to the right audience.
Implementing Data-Driven Strategies for Proactive Risk Management
Cutting through the noise, keeping executives engaged, and supporting thorough operational assessments all depend on the availability of accurate, real-time, highly focused data. That’s why Prime 8 strongly encourages clients to take advantage of data visualization techniques such as BI dashboards. Thanks to today’s no code/low code options, dashboards that can be customized to align with the specific goals of any individual project are easier, faster, and less costly to implement than ever before.
For a large provider of cloud services, we introduced a dashboard prototype just weeks into the engagement. We then continuously improved it so the dashboard could easily scale and flex to new requirements.
Similarly, when a well-known global tech giant asked us to help manage a new marketing initiative that involved extracting data from spreadsheets, the team turned to Power Automate, a low-code cloud service that met the client’s immediate needs today and could also easily scale without requiring additional coding.
Supporting Continuous Proactive Risk Management
Risk management is often likened to auditing or compliance monitoring. It has elements in common with those functions but is really quite different. Those are point-in-time evaluations against highly specific criteria, whereas proactive risk management requires a continuous flow of information and monitoring using the in-depth operational assessments and data visualization techniques we have outlined here.
Prime 8 consultants stand ready to help you get risk management right using proven, data-driven strategies. Contact Prime 8 and let’s talk about how we can incorporate proactive risk management into your next project.
