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Project teams understand that every endeavor has elements of risk involved and can benefit by assessing those risks and taking them into consideration as part of the planning process. Without a conscious effort to understand the risk the project faces, a team can be subjected to a continuous series of crisis events that can send the project over-budget and beyond deadlines and could ultimately culminate in a failed effort.
Here we review the core principles of risk assessment that every manager and team member should understand to ensure a positive project outcome.
Image Credit: Wikimedia Commons/David Vignoni
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Discover Things That Can Go Wrong
The first core principle of risk assessment is the discovery of uncertainties within the project. After all, the factors, influences and outcomes that remain unknown are the ones that can torpedo even the most well-planned operation.
This principle requires an exploration of the project at every level, from multiple perspectives to aggressively uncover and document every uncertainty that can influence the project's outcome. Although such an effort takes time, thought and collaboration, the result of such an intense effort is a team awareness that will help make the next principle of risk assessment, risk analysis, a profitable exercise.
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After all uncertainties are identified and documented, a team should attempt to understand what each uncertainty means. For example, does each specific unknown impact the cost of the project? Will the uncertainty cause delays in producing project deliverables?
For each line item describing a potential problem, a study of the likelihood of that potential problem should be completed. At this time, each risk event should be rated as probably, very likely or unlikely to happen. At the same time, the impact of each event should be rated in steps from marginal to catastrophic.
The final step of analyzing risk involves deciding on an approach for mitigating each event. For example, events can be deflected, avoided or controlled.
To help with the risk analysis, every risk event can be listed in a table with its likelihood, strategy, and contingency plan. With these details conveniently organized, the final stage in the assessment and prioritization can be more profitable.
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Teams may lack the time and resources to properly address all uncertainties associated with a project, forcing risks to be dealt with according to their significance (their likelihood of impacting the project). By focusing on eliminating or mitigating the most important risks, project teams can avoid pesky, time-consuming distractions that introduce new inefficiencies into the planning process.
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The basic principles of risk assessment listed here will help project teams be prepared when unexpected circumstances affect their work. By providing valuable sustainability throughout the course of a project, risk assessment will help ensure the production of quality deliverables on time and within budget.
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Haimes, Yacov Y. Risk Modeling, assessment, and management. John Wiley & Sons, Inc., 2009