Projects are unique undertakings, with a clearly defined start and end, and use a temporary organisation structure to bring about one or more changes with associated benefits. Alongside any change comes uncertainty, often referred to as #risk. Here are some of the risk management approaches that the project management methodology #PRINCE2® recommends:
Avoid
To avoid a risk, you will need to take action to remove the potential cause of that risk. This will mean that once this action is complete, the risk can no longer have a negative impact on the project. This may be achieved by planning or re-planning certain aspects of the project but will most likely involve additional cost to take corrective action.
Reduce
To reduce a risk, you will need to take action to change the probability and/or impact of that risk, and this is often referred to as ‘mitigating’ a risk. The activities associated with reducing the risk will need to be built into your project plan, and the associated costs will need to be agreed.
Transfer
To transfer a risk, you will need to pass part or all of that risk to a third party. A common example of transferring a risk is taking out an insurance policy for your car, where you are transferring the cost element of the risk to the insurance company, but you still retain other aspects of this risk such as loss of time, inconvenience, etc.
Share
To share a risk, you will be distributing the gain/pain of that risk amongst one or more parties. For example, you may opt to share a risk with one of your suppliers and this can be an effective way to encourage collaboration with respect to risk management.
Accept
To accept a risk, you will be taking an active decision to allow the risk to remain and allow the full impact of that risk to occur should it come to fruition. There are no costs associated with managing this risk, but equally there will be no reduction in the probability or impact of that risk. Accepting a risk is a common response in situations where taking actions to reduce or remove the risk would far outweigh the cost of the full risk impact (i.e. the risk action would not offer value for money).
It’s important whatever your course of action for risk management that you ensure that the cost of such actions are proportionate to the impact of the risk if it were to happen. For example, it would not (in most cases) be appropriate to take action to avoid a risk with a monetary impact of £10k if the corrective action required to avoid the risk would cost £100k.
Written by: Nigel Galloway
PRINCE2® is a registered trade mark of AXELOS Limited, used under permission of AXELOS Limited. All rights reserved.
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