5 Proven risk mitigation strategies in project management
A risk is a possible event or condition whose occurrence would have a negative impact on the project objectives.
These risks can present throughout the project lifecycle and can really slow down the entire process of completion.
This costs organizations a lot of time and resources. Therefore, to reduce the cost to the project implementation, there are risk mitigation processes that each project team member can practice to make sure the project gets completed on time and without any hindrances.
In the specific context of project management, there is a range of risks that can affect the successful execution of projects. These include:
- Economic crisis, inflation
- Riots, war, terrorist acts
Appearance or modification of regulations
- Appearance of new taxes or duties
- Modification of standards or technical rules
- Changes in the rules for granting public aid
- Existence of previous patents, trademarks and models
- Appearance of a competing product
- Misperception of the need (qualitative approach)
- Overestimated market volume
- Overestimation of market prices
- Failure of a key supplier
- Increase in purchase prices
- Environmental risks
- Action of pressure groups
- Physical difficulties to access the site
- Weather risk
- Economic difficulties, bankruptcy filing
Denunciation of the contract
- For cases of force majeure
- For not respecting the agreements (deadlines, means...)
- Insufficient time
- Insufficient budget
- Too ambitious specifications
- Unavailability of certain technologies
- Underestimation of the complexity
- Underestimation of human and/or technical resources, of the investment
Poor design choices
- Choice of an unsuitable or non-performing solution or process
- Poor control of quality and communication
- Lack of visibility and/or inappropriate decisions
Hence, it is imperative to reduce or mitigate the impact of these threats to the viability of the project, if not eliminate them completely.
Therefore, project risk mitigation is the strategy of preparing for and mitigating the impact of threats that may impede the successful execution of the project. Enterprise project teams will outline a risk mitigation plan for potential situations that are unavoidable or cannot be entirely avoided, such as weather changes and data breaches.
This practice is not intended to avoid a risk, but it helps project teams determine what steps they need to take before mitigating the potential effects of a problem and how to manage the consequences if a threat occurs.
Risk mitigation allows project teams to maintain the viability of their projects because they are able to execute them within reasonable costs.
To do this, strategies need to be developed. There is a variety of strategies that can be deployed, but it is important to ensure that they are effective.
So, what are the effective strategies to deploy in order to mitigate project management risks?
Once your project risks are identified, the next step is to take appropriate action. This article outlines the five strategic choices for risk mitigation.
The goal is for you to be able to think of an appropriate strategy for your project situation.
Of the many options available, five stand out as being most effective, as follows:
Accepting the risks
First, you must accept that risks are inevitable. There will always be a trade-off, and no matter what decisions you make, there will be potential risks.
In fact, you may be faced with situations where the cost of assuming the risk will be greater than the potential loss.
The first step in any risk mitigation strategy must begin before the risks materialize. This step involves identifying, researching and understanding the risks to which your company is exposed.
You can categorize risks by likelihood or by severity. One of the best ways to do this is to form cross-functional teams within the organization and encourage communication. This will allow you to get a complete picture of your office environment.
While it may seem simple, collaboration between teams is important. It is the key to communication, belonging and transparency. It's with a cross-functional team that you'll be able to have a diverse opinion.
When humans feel threatened, they react by confronting or fleeing. This is called the fight or flight response. From a certain angle, we can observe the same reactions in entrepreneurship.
Sometimes it's better not to face a threat if you can't control or eliminate it. In this case, it may be better to adjust your plans to avoid the risk.
There is no shame in running away if it allows you to continue your activities. Moreover, avoiding a risk does not necessarily mean changing your plans completely.
You may simply decide to put additional controls in place to avoid harmful outcomes. For example, you may decide to do more testing of your products before you launch them into the marketplace.
This is especially important for organizations launching with new products that have different regulations than those they are used to.
In order to identify risks and avoid them, it is essential to examine both internal and external factors. When reviewing your company's procedures, identify tools or activities that are dependent on your success. Make sure you have alternatives in case problems arise.
The past year has brought a concrete example of the problems that can be caused if a company is dependent on any software. Indeed, since many workers had to perform their tasks at home, organizations have had to find alternatives to conduct their team meetings.
Several video conferencing software programs have grown in popularity. Over-reliance on face-to-face meetings or a particular software program makes you more vulnerable to risks.
The third strategy is risk control. It is similar to risk acceptance, but it goes a step further since the organization must make efforts to control the possible risks. The goal is to identify and reduce possible negative consequences.
If you identify a risk, but are able to control it, it loses its power. This can have a big effect on your team's morale.
Companies face problems every day. They have to take risks that are calculated. The more control they have over their continuity, the more likely they are to be successful.
When faced with a significant risk, even the calmest manager may choose to micromanage.
Task management tools are a good way to achieve good team management. There is a solution for every business. Make sure you choose a project management software that allows you to manage time and track tasks continuously.
There are many ways to control risk. The most common are diversification and risk spreading and they are designed to mitigate impacts.
Working online and saving all documents is another way to reduce risk. Consider installing a secure file sharing system to prevent data leakage. Years ago, companies had to keep records for long periods of time.
This practice exposed them to a great risk of loss through fire or even flood. Fortunately, we can now control this risk through technology.
Transfer the risk
Businesses can control risk to the extent that it is predictable. However, some events like weather events can seem uncontrollable even though they are sometimes predictable. That is, organizations can spread or transfer risk. The most common way to do this is to purchase appropriate insurance policies.
Most risks are not dramatic and uncontrollable natural disasters. They are often the result of human error. A risk transfer strategy helps identify the responsible parties.
With work-from-home, this is a more difficult practice to apply. This highlights the challenges of remote team management.
Another common method of transferring risk is to use indemnification clauses in your contracts. Such language means that both parties agree to share a risk.
Both parties do this by indemnifying the other for any negative impacts mentioned in the agreement.
The last strategy presented is the most important one to implement. Successful companies monitor everything. They are constantly looking for emerging trends. It's kind of like an early warning system.
There are many ways to do this and the most successful organizations use a wide variety of methods.
New project management techniques and ways to improve e-commerce analytics are helping business leaders monitor all risks in real time.
One of the biggest challenges of risk management is to exceed the sometimes narrow goals of your customers.
While it may sound great to promise to put the customer at the center of your business, it makes you more vulnerable to unexpected risks.
It's best if you have complete control over your situation. You need to be focused on your customers while still studying the market.
Digital transformation is a major driver towards this change of mindset. There is so much information available on the web that markets are changing faster than ever.
The adoption of new technologies is one of the most exciting aspects of risk management. By embracing digital technologies, companies have rapid access to information.
With digital transformation, it is now much easier for project teams to measure risk
It is now possible to assess the influences of our market.
This set of elements constitutes an effective alert system in the management of project risks.
We are talking about tools that have been developed to provide project teams with indicators to guide them towards the most appropriate decision.
What are some of these tools?
Klaxoon has developed its own tool for this purpose and recommends a method borrowed from the US Navy.
The Klaxoon Board
Using the Klaxoon whiteboard and its advanced features, you can easily mobilize collective intelligence to analyze all the risks, their ins and outs, and define an action plan to reduce the probability of these risks occurring.
The PERT method
The PERT method is a graphical representation of task scheduling and planning, devised by the US Navy in the 1950s. The diagram, whose initials stand for "Program Evaluation and Review Technique", facilitates project management by providing both direct visibility on the sequence of tasks to be carried out and therefore on the interdependencies, and control of deadlines.
Once completed, the diagram highlights the critical path, i.e. all the tasks that have no margin. This identification allows you to anticipate the different scenarios and prioritize the critical tasks as levers to reduce delays.
With the PERT template, ask yourself the following questions at the beginning of the project and answer them as a team:
- Which actions can be carried out in parallel to save time?
- Which stage of the project cannot be started until another stage is completed?
- What can you anticipate without affecting the rest?
This template is ideal for use in project management. Even before the start of a project, gather the stakeholders and create the diagram together.
Thanks to a co-constructed graphical representation, visibility on the scheduling and planning of tasks is increased. This way, you are able to compare the desired end date of the project with the reality on the ground, thanks to a follow-up of the sequence of tasks.
This highly visual method can be adapted to all projects and allows you to make the necessary adjustments to ensure that they run smoothly. Anticipate possible interferences and reap the rewards of your work on time. If the deadline cannot be met, find solutions as a team and ensure the success of the project!
The unknown threats to any project or organization are the scariest. This is why risk mitigation is so important.
The risk mitigation strategies need to be implemented in every stage of the project, but the only way this can happen successfully is if all the employees have sufficient knowledge and training to implement various risk management and mitigation practices in their project.