Project Management Tips and Techniques:
Find the Right Technique for Managing Risk
Tom Mochal

Each month, Tom Mochal, President of TenStep, Inc. presents project management tips and techniques for planning and managing a project. TenStep, Inc. has a comprehensive, scalable project management process called TenStep (www.TenStep.com), as well as a project lifecycle process called LifecycleStep (www.LifecycleStep.com). Tom has also published a popular book called Lessons in Project Management that can be purchased at  www.TenStep.com.  Pipeline readers receive 20% off any TenStep or LifecycleStep purchase by entering the coupon code of "Pipeline" in their purchase.

Risk refers to future conditions or circumstances that exist, outside of the control of the project team, that will have an adverse impact on the project if they occur. Whereas an issue is a current problem that must be dealt with, a risk is a potential future problem that has not yet occurred.

Once risks have been identified, there are a number of options that the project manager should consider for responses.

• Leave it. In this approach, the project manager looks at the risk and decides to do nothing. This can happen for one of three reasons.

  1. The project manager may decide that the potential impact of the risk on the project is not substantial enough to require a risk response.
  2. The project manager may feel that the risk should be managed, but that the negative impact of the risk is not worth the cost and effort required to manage the risk.
  3. There may not be any reasonable and practical activities available to manage the risk. This is different from the prior reason where the cost was more than the benefit. In this case, there are is no practical way to manage the risk, even if the risk has been identified as high. 

•  Monitor the risk. In this case, the project manager does not proactively manage the risk, but monitors it to see whether it is more or less likely to occur as time goes on. If it looks more likely to occur, the team must formulate a different response at a later time. This is also a good approach if you have identified a risk that should be managed, but the risk event is far off in the future. For instance, if your risk event is nine months in the future, it may not make sense to spend resources to manage the risk at this time. A better approach might be to monitor the risk on a monthly basis. It is possible that over time the risk will go away because of other circumstances. However, if it does not go away, the team will still need to manage the risk in the coming months.

•  Avoid the risk. Avoiding the risk means that the condition that is causing the problem is eliminated. One example is that if you find that a part of the project has high risk associated with it, that whole part of the project is eliminated. The risks associated with a particular vendor, for instance, might be avoided if another vendor is used instead. This is a very effective way to eliminate risks but obviously can be used only in certain unique circumstances.

• Move the risk. In some instances, the responsibility for managing a risk can be removed from the project by assigning the risk to another entity or third party. For instance, outsourcing a function to a third party might eliminate that risk for the project team.

•  Mitigate the risk. In most cases, this is the approach to take. Mitigating the risk means that you put in place a set of proactive steps to ensure that the risk does not occur. Another purpose of mitigation is to ensure that if the risk occurs, the negative impact of the risk is minimized.

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