Projects are delicate operations. There is so much that can impact them; a storm cutting off the supply chain, equipment failure or a labor dispute are merely three possible situations in a seemingly endless succession of risks.
The risk response plan that you create to deal with these risks, which describes risk identification, assessment, and mitigation response strategies, could mean the success or failure of the project. It’s no wonder so much of project management is focused on risk!
Controlling risk, having a risk response plan and implementing risk response strategies are methods to better manage your project and deliver success. Another way is to have project management software to plan and track your risk response strategies.
What Is a Project Risk?
A project risk is an uncertain event that can potentially impact a project, either positively or negatively. Project managers need to create risk response plans that describe the risk mitigation strategies they will use to minimize the negative effect of risk events.
Related: Free Risk Tracking Template for Excel
What many don’t think about is that risk can also be good for a project. Negative risk? A blackout-causing storm that halts production. Positive risk? The price for the materials you need for your project has dropped considerably. In project management, negative risks are commonly referred to as threats, while positive risks are known as opportunities.
- Negative Risks (Threats)
- Positive Risks (Opportunities)
Whatever type of risk you get, you want to have a risk register and a risk response plan for dealing with it.
While it’s impossible to prepare for everything that might happen in a project, with the use of historical data, experience and luck, you can identify project risks that are likely to occur and then create a plan to respond to them.
What Is a Risk Response?
Risk response is the process of managing risk events that arise as issues in your project. The risk response process is guided by a risk response plan.
What Is a Risk Response Plan?
A risk response plan is a document that explains the strategies that would be taken to mitigate negative project risks. It’s part of the larger risk management plan that is subsequently part of any project management plan.
Risk response is just as it sounds. You’re responding to risks. To do so, project managers must work with stakeholders, secure resources for the risk response strategies and assign risk owners to deploy them.
Before you respond to risk, you have to identify it. Risk identification is done in the project planning phase. While the definition of risk is uncertainty, that doesn’t mean that every potential risk to your project is going to come out of left field and surprise you.
Good risk response starts with good risk identification. As noted above, you can figure out a lot of potential project risks by looking at similar projects you managed, talking to your experienced project team members about what they think could happen and reaching out to stakeholders and mentors.
Identifying risks is only the beginning. You need project management software to manage those risks. ProjectManager is online software that can manage your risks in real time. View all of your risks from the project menu, create risks as tasks and assign them to your team. You can then set priorities, add tags and more. Feel free to set the risk status by using the pulldown menu. Get started with ProjectManager today for free.
Why Is a Risk Response Plan Important in Project Management?
Clearly, since risk happens, having a risk response plan is important. Managing a project is all about organizing activities to meet schedules and budget constraints. Project risks can impact that timeline and increase costs. The quicker you identify them and resolve any issues that come up, the more likely you are to deliver a successful project.
Therefore, a risk response plan is a way to reduce or eliminate any threats to the project. It can also be used to increase the opportunity offered by positive risk. That is, if there are positive risks that can help the project, a well-thought-out plan sets up how to quickly gain as much advantage from it as you can.
Sometimes, risks are not going to be resolved. The risk response is also a way to put a contingency plan into action. That is, have a Plan B when you can’t proceed the way you have been in the project.
Again, a risk response plan gives the project manager options. It provides awareness of the many risks that might occur in the project and provides various means of addressing them.
Types of Risk Response Strategies
We’ve talked a lot about having a risk response to address positive and negative risks as they show up in your project. That’s where a risk response plan comes in.
A plan gives the project manager a variety of risk response strategies to mitigate negative risk if it occurs. As defined, risk is uncertainty that can impact a project in either a negative or positive way. As such, there are strategies for maximizing the benefit of positive risk.
Related: Free IT Risk Assessment Template for Excel
Risk Response Strategies for Negative Risks (Threats)
The four strategies for risks are listed below:
- Avoid: This risk response strategy is about removing the threat by any means. That can mean changing your project management plan to avoid the risk because it’s detrimental to the project.
- Mitigate: Some project risks you just can’t avoid. Those you need to mitigate, which is reducing the impact of the negative risk on the project.
- Transfer: As the name implies, here you’ll transfer or pass the work on resolving the project risk to a third party, such as buying insurance or getting a warranty and guarantee.
- Accept: This risk response strategy consists in identifying a risk and documenting all the risk management information about it, but not taking any action unless the risk occurs.
Risk Response Strategies for Positive Risks (Opportunities)
On the other side of the coin, there are those positive risks that you want to exploit. There are three strategies for these, too:
- Exploit: When there’s a positive risk or opportunity you want to exploit you need to add more tasks or change the management plan to take advantage of it. There is risk inherent in this approach, but often the reward is worth it.
- Enhance: Here you increase the chance of a positive risk occurring in your project.
- Share: Here you’ll share the risk response with other partners across various teams or projects. It might mean sharing a skilled team member across various projects.
What If There’s Both a Positive and a Negative to a Risk?
Sometimes risk can have both a threat and an opportunity embedded within. In that case, there are a couple of risk response strategies you can apply:
- Accept: Here you accept the risk and wait until an adequate response can be determined, such as a contingency plan or allocation of time and cost. This decision must be shared with stakeholders.
- Escalate: If the risk cannot be monitored and is beyond the management of the project, it is escalated to a higher level, such as program or portfolio management.
How to Make a Risk Response Plan
Only once you understand the types of risk response strategies you can begin to develop a risk response plan. The risk response planning process is where you outline the strategies that you’ll use to manage negative risks (threats) and positive risks (opportunities).
The plan will include the identification of risks, tasks associated with responding to them and the risk owner who take action. The plan is a way to structure your strategies to make sure that no steps are skipped.
You have to take into account the probability and level of impact of a risk and prioritize your response to it. Then, determine if it’s cost-effective, realistic and whether it will be successful if followed through. Your risk assessment must be agreed upon by all those involved, especially the project stakeholders.
The plan will employ one of the risk response strategies listed above. Then, there will be risk triggers that set off the plan. These responses must be prioritized as well, from low probability and low impact to high probability and high impact. This will help you determine which risks to respond to.
How ProjectManager Helps with Risk Response
ProjectManager is a cloud-based software that helps you organize your plan, monitor its progress and report to stakeholders to keep them updated on your progress. ProjectManager delivers real-time data that helps identify risk faster and track your risks in real time.
Create Risk Response Plans on Gantt Charts
Build robust risk response plans on our interactive Gantt charts. You can add risks to your plan as you would tasks, adding whether to avoid, mitigate, transfer or accept the risk. You can also add documentation and note if the status is opened or closed. Then share the Gantt chart with your team and stakeholders so everyone is in the loop.
Use Multiple Project Views
Teams won’t always need the details of a Gantt chart. In this case, they can simply toggle to another project view to execute their work while resolving risks. Teams can use a robust list view or utilize the visual workflow of a kanban board to manage their backlog and collectively plan sprints. Managers get transparency into the process and can relocate resources as needed to avoid bottlenecks.
Track Risks in Real-Time on Project Dashboards
Another tool to give managers a high-level view of the risk response is the real-time dashboard. Unlike lightweight tools, our dashboard doesn’t have to be configured. It’s ready to work when you are. It automatically collects status updates and calculates project metrics, which are then displayed in easy-to-read charts and graphs.
ProjectManager is award-winning software that organizes, tracks and reports on project risk with live data that informs insightful decision-making. Keep your teams connected whether in the office or distributed across the globe. See why NASA, the Bank of America and Ralph Lauren use our tool to work more productively. Try ProjectManager free today!