Risk Management: How to Identify and Address Potential Risks or Issues

Life is unpredictable and business is no exception. No matter how well you plan a project or the implementation of a new business strategy, there is always a chance that unexpected issues may arise – from team members quitting to the lack of resources to finish the project. In order not to fall victim to these abrupt problems, businesses use risk management to identify and prevent potential issues that may impact the success of a new project or initiative.

         In this article, we are going to explore the basics of risk identification and management and discover how to use it to ensure the success of your new undertakings.

What is risk management?

         Risk management is the process of identifying and analyzing potential risks and issues before the beginning of a new project and creating a detailed plan on how to respond to or prevent them from occurring. It is an essential aspect of the overall project planning that allows businesses to avoid and minimize potential issues, reduce losses and be prepared for unexpected situations. 

Typically, the project risks are divided into several categories, including:

–          Technical risks – issues related to the implementation of new technology, service outages, downtimes or new software acquisition.

–          Financial risks – shortage of project funds, unforeseen expenses and budget overruns.

–          Resource risks – staff incompetence, lack of skills and knowledge or lack of personnel to complete the project in general.

–          Communication risks – the absence of a single communication channel leading to data loss, misinformation and project disruption.

–          Schedule risks – missed deadlines for tasks and other delays.

–          External hazard risks – events that are out of the company's control, involving storms, floods, earthquakes, terrorism, vandalism, labor strikes and civil unrest.

How to identify and address project risks?

         The likelihood of risks and issues happening is an inherent part of each project, be it large or small. Here are some of the risk management practices that will help your organization reduce the risk probability and have a detailed plan of risk mitigation measures.

1.     Identify the possible risks

The process of identifying project risks takes place at the initial stage of project planning and is a great way to tackle common pitfalls.  Take your time to analyze your project and create a risk register which is, in fact, a list of the potential issues that may arise. Further, during the project's progress, this register can be used to track issues, define their severity and determine what steps should be taken to handle them.

2.     Prioritize risks

Different risks can have different impacts on the project's progress and consequently will require different amounts of resources to handle them. To properly plan the risk resolution process, you need to evaluate the likelihood and consequences of risks you have already enlisted. You can do this by simply analyzing the impact of a certain risk on the total project and categorizing it as high, medium or low. By doing so, you determine the risks that can wait for being resolved and the ones that are more urgent. It will help your team to prioritize tasks related to risk management and avoid potential losses or project failures.

3.     Develop responses to the risks

Each identified risk should have a risk mitigation plan which includes the list of actions that have to be completed to resolve it. The main goal of this plan is to prevent a potential issue from happening or minimize the risk impact on the project if the problem cannot be avoided. Typically, the level of detail for risk mitigation plans will vary depending on the risk category. For risks belonging to the high category, you will need a detailed action plan, medium risks can be handled with a brief list of actions, while low risks may not need action plans at all.

4.     Use software for monitoring risks

As you can see, proper risk management incorporates a lot of stages, meetings and tasks. Tracking all this manually can be overwhelming and prone to mistakes and delays. By using a CRM system to track issues and monitor their resolution, you can significantly streamline the risk management process. The software helps businesses to automate the routine tasks related to issue resolution, keep team communication in one place, monitor the issue status and stay informed about all the updates. Overall, it provides an accurate picture of the project's progress and allows you to foresee and monitor risks.

Wrapping Up

Every project holds its own set of risks which can be hard to predict. In the case of risk management, prepared ahead means forearmed. Therefore, to be able to handle issues timely, you need to have a sound risk management strategy that fits every project in place. Developing a risk response plan ahead and implementing the right platform to monitor project issues will help your business to prevent a lot of problems and solve the ones that have already happened more effectively.