As a project manager or team member, you manage risk on a daily basis. It is one of the core actions you take daily. Learning how to apply a systematic risk management process, and putting into action the core basic risk management process becomes paramount. Then your projects will run more smoothly and be a positive experience for everyone involved.

A common definition of risk is an uncertain event that if it occurs, can have a positive or negative effect on a project’s goals. The potential for a risk to have a positive or negative effect is an important concept. Why? Because it is natural to fall into the trap of thinking that risks have inherently negative effects. If you are also open to those risks that create positive opportunities, you can make your project smarter, streamlined and more profitable. Think of the adage –“Accept the inevitable and turn it to your advantage.” That is what you do when you mine project risks to create opportunities.

Uncertainty is the core of any risk. You may be unsure if an event or risk is likely to occur or not. Also, you may be uncertain of what its consequences would be if it did occur. Its likelihood – that is the probability of an event occurring, and consequence and the impact or outcome of an event, are the two components that characterize the level of the risk.

All risk management processes usually or more often the same basic steps, although the description of the steps might differ in different organizations. Together these 5 risk management process steps combine to deliver a simple and effective risk management process.

Step 1: Identify the Risk. You and your team uncover, recognize, evaluate and describe risks that might affect your project or its outcomes. There are a number of identification and evaluating techniques you can use to find project risks. Here the Project Risk Register is being developed.

Step 2: Analyze the risk. Once risks are identified you evaluate the likelihood and consequence of each risk. You develop a general idea of the nature of the risk and its potential to affect project goals and objectives. This information is inputted into your Project Risk Register.

Step 3: Evaluate or Rank the Risk. You evaluate or rank the risk by determining the risk level, which is the combination of likelihood and consequence. You make decisions about whether the risk is practically acceptable or whether it is serious enough that calls for immediate attention. These risk rankings are also added to your Project Risk Register.

Step 4: Treat the Risk. This can also be called Risk Response Planning. This is where you assess your highest ranked risks and set out a plan to treat or modify these risks to achieve acceptable risk levels. How can you minimize the probability of the negative risks as well as enhancing the opportunities? You create risk mitigation strategies, preventive plans and contingency plans in this step. Then you add the risk treatment measures for the highest ranking or most serious risks to your Project Risk Register.

Step 5: Monitor and Review the risk. This is where you take your Project Risk Register and use it to monitor, track and review risks. Risk is about uncertainty. If you put a framework around that uncertainty, then you effectively reduce the risk level in your project. Which means that, you can move much more confidently to achieve your project goals. By identifying, evaluating and managing a comprehensive list of project risks, unpleasant surprises and barriers can be mitigated as low as reasonably practicable and excellent opportunities discovered.

The risk management process also helps to resolve problems when they occur, because those problems have been put into considerations, and plans to treat them have already been developed and agreed. You avoid impulsive reactions and going into “fire-fighting” mode to rectify problems that could have been anticipated. This makes for happier, less stressed project teams and stakeholders. The result is that you minimize the impacts of project threats and capture the opportunities that occur.

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