Effective risk management helps minimise the impact of threats and to capitalise on opportunities
Every change comes with potential risks and opportunities. Most change initiatives originate out of the realisation that the risk of acting is lower than the risk of doing nothing. Pretending the risks don’t exist increases team stress and the potential for failure. Proactively managing risk (acknowledging and anticipating) can give us an edge in dealing with challenges as they arise. A proactive risk management approach helps us to deliver the project on time, on budget and with the required results. Additionally, team members are much happier if they do not need to stay in fire fighting mode to fix preventable failures.
Risk management is the identification and evaluation of potential risks, and the creation of procedures to avoid or minimise their impact.
5 tips for risk management during change
1. Use a pre-mortem to identify the risks early
A postmortem enables us to identify what went right or wrong after the fact, whereas a pre-mortem provides an opportunity to consider what could go wrong in advance. The key is to imagine the project has failed and consider what may have gone wrong. Many change teams have a level of bravado around change hoping they will be able to mange all elements effectively. A pre-mortem gives your team permission to share elements intrinsic to the project and those outside the team’s control. e.g. stakeholder resistance, inter-departmental politics, logistical or procedural concerns.
Potential risk categories:
- People. These risks relate to the potential impact of change on individuals (incl. health/safety, behaviours, resistance, stress, etc).
- Operations. These have to do with finance approval, logistics, procuring supplies, etc.
- Reputation. A loss of employee confidence or a damage to the reputation of the organisation due to project failure or poor communication.
- Procedures. These are risks associated with work flow, disruption, misappropriation of funds, loss of productivity, etc.
- Project. These include project over-runs, weather delays, etc.
- Technical. Include technology failures, unfit for purpose, system incompatibility, etc.
- Political. Changes in legislation, government policy, taxes, etc.
2. Rank the risks and opportunities
Not all events have the same potential impact. The risk of a few days delay on the project is very different from the risk of a key sponsor withdrawing support. Project opportunities when identified early can enhance project effectiveness. By quantifying potential risks and opportunities we allow them to be compared. One approach is to assess the risk along two key dimensions (rating on a scale of 1-5):
- the probability of the risk/opportunity occurring
- the impact of the risk/opportunity if it actually occurs
Multiply the two numbers to produce a risk factor from 1 to 25. Then prioritise these potential risks/opportunities. Identify any “showstoppers” that could derail the project.
3. Plan for contingencies
For each risk consider what steps you can take (if any) to eliminate or mitigate the risk. Sometimes even a small adjustment could reduce or eliminate the probability. Plan for how to act if the risk becomes a real issue. Are there potential work-arounds, or would the risk necessitate rethinking your entire initiative (showstoppers)? Planning remedial action ahead of time can help keep your initiative on track. When our team understand the required responses to risks we can minimise negative effects. Minimising the risk could require changing suppliers, utilising a different technology or even scrapping the project. Spending money on a doomed project doesn’t make sense.
4. Monitor and communicate the risks
Participants in failed change projects were frequently unaware of the real risks when they began. The most concerning insight from research is that someone on the project was actually aware of the risk, but didn’t feel they could safely share their insights. This is why two-way risk communication is an essential part of any successful change project. A Risk Register (Risk Log) that sets out all the risks, their risk factors, and current status can be effective in monitoring risks throughout the project. Include risk communication and progress updates in team meetings, make project risk updates part of the default agenda (not an add-on). Create opportunities for team members to freely discuss the status of identified risks and report any new ones. Effective risk communication includes the project sponsor or principal as pivotal risk decisions may be above the authority of the project manager.
5. Clarify ownership
Creating a list of risks is only the first step. A key next step is to make it clear who is responsible for each risk! Assign a risk owner for each risk, a member of your team that has the responsibility to monitor, report on and optimise this risk during the project. Ownership is equally important to project opportunities.
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