Risk Management Essentials
Identifying risks early allows you to put out small fires before they becomes wildfires. Proactive risk management creates clarity, increases confidence, saves time, money and resources.
May 9, 2025
One of the key distinctions between novices and experts in project management is the ability to proactively identify and resolve issues before they really become issues. Risk management is conceptually very simple - it is the practice of asking what might go wrong, what should we do to prevent it and what do we do if we can't prevent it? In practice, experience goes a long way to helping you anticipate which risks need to be managed and which risks need to be managed aggressively.
A formal risk management process might seem like an unnecessary overhead, especially when teams are already stretched thin with their existing workloads. However, not suprisingly, unmanaged risks tend to morph into issues far more frequently than those that are proactively addressed. By adopting a robust risk management approach, you not only exemplify professionalism, ensure smooth project execution and breed customer confidence, you actually save time in the long run as well.
Avoidable risks can easily evolve into critical issues. By identifying risks early, you can put out a small fire before it becomes a wildfire.
The Risk Management Process
The process begins with brainstorming potential risks that could impact your project. Some simple examples of potential risks include:
- A developer accidentally deleting critical data.
- A key team member leaving the company.
- Too much unanticipated scope creep.
- A highly visible customer escalating a complaint to management.
- Regulatory issues or legal challenges from competitors.
- Technology failures, such as server outages.
Creating Your Top Ten List
For each of the risks your brainstorm, assign a probability and impact rating. The probability rating is how likely the risk is to occur, while the impact rating is how severe the consequences would be if it did. Multiply these two ratings to calculate your exposure (i.e. risk score). This score helps you prioritize risks and focus on the most critical ones first.
For instance, a risk with a high probability and high impact would have a high overall exposure and should be addressed immediately. A risk with a low probability and low impact would have a low overall exposure and may not require immediate attention.
After having a look at your risks sorted by exposure, decide how many risks your team can realistically address. This will vary based on team size, the complexity of the project, your overall "risk appetite", and so on, but working with the top ten risks is a common approach.
Mitigation and Contingency Plans
For each of the risks you will manage (e.g. those on your top ten list), develop two essential plans:
- Mitigation Plan: This outlines your strategy for preventing the risk from turning into an issue. For example, if the risk involves legal liability, the mitigation plan may involve adding stronger language to terms of service. If cost overruns are a concern, negotiating price caps with vendors may be beneficial.
- Contingency Plan: This outlines your response if the risk does materialize. For instance, if a data breach occurs, what processes are in place for service recovery? How will you communicate with customers and stakeholders about the issue?
Triggers and Dependencies
One common risk management challenge is the tendency to delay action while hoping for potential issues to resolve themselves. For example, imagine you are dependent on another team to deliver a critical widget. They promised delivery by the first of the month but they are already a week late. At what point do you implement the contingency plan, which may make someone look bad? The longer you hesitate, the less time you have to execute your contingency plan and work around the issue.
This is where establishing a trigger comes into play. Setting a predetermined trigger for action helps prevent those situations where one day turns into two, then into five, then into ten. By proactively defining a trigger as something like "if the widget is not delivered on time, we wait precisely eight days before escalating the issue", everyone knows what to expect and you do not have to be the bad guy who would not wait.
Dependencies are great examples of risks worth managing. If you are depending on a deliverable from another team, it is helpful to work with your counterparts from the teams you rely on to develop the mitigation and contingency plans together.
Continuous Review and Communication
Those are the essentials - what might go wrong (the risk), high likely is it (the probability), how bad would it be (the impact), how do you rank the risk (by exposure), how do you prevent it (the mitigation plan), what do you do if it happens (the contingency plan) and when do you execute the contingency plan (the trigger).
You will want to regularly review your list of risks alongside your active issues. As new risks arise or existing risks shift in probability or impact, update your ratings accordingly.
Don't forget to work closely with your stakeholders on your risk management efforts as well. They will appreciate your proactive approach and will likely offer additional insights or risks to incorporate into your list.
Not suprisingly, Clarity Forge has made it easy to track and manage your risks just this way!
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