Managing Projects: Risks and Issues (Part 2)
Third sector projects present their own unique set of challenges and risks – make sure you’re ahead of the curve when it comes to identifying and managing them.
Managing Projects: Risks and Issues is a 5 part series providing practical advice and a brand new ‘CARE’ model to third sector project managers. Read part 1
Part 2: Assessing project risks
Risks are inherent in all projects and risk management is central to the role of a Project Manager. Now that you know the risks your project faces and why (see part 1: Identifying Project Risks) you need to assess the probability of them occurring, the proximity of their occurrence and the impact they may have, should they occur.
A risk rating system will help you to do this. You can use any type of rating system you prefer – the important thing is for everyone to be clear on what the definitions for each value are. If you use a scale of 1-5 for impact or severity of risk, with 1 being minimal impact and 5 being the most severe impact what does this mean?
In health and safety risks does a 5 relate to a possible fatality? What then does a 5 mean for a risk related to losing funding? Would a 3 mean the same thing to you as it might to someone else involved in the project? Wherever possible, risk ratings shouldn’t be open to interpretation. They shouldn’t be subjective. They should be clear, factual and based on evidence.
One of the simplest ways to achieve a common understanding is to have clear rating guidelines. For example, when rating the proximity, you might use:
1 = Far in the future – greater than 6 months away
2 = Mid to long term – 3 – 6 months away
3 = Mid to short term – 1 – 3 months away
4 = Likely to be near future – 1 week to 1 month away
5 = Imminent – within the next week
Probability may be rated using a similar scale (1-5), or by using a percentage value. Impact is more difficult to scale. We often talk about ‘Project Killers’ as being the highest level of rating. Basically, if the risk occurs, might your project be closed as a result? Some Project Managers will use a numerical value (1-5), others will use a financial value (for example the impact is that the project will lose £300k if the risk occurs) – it will depend upon what is right for your project.
However you choose to scale it, this needs to be used consistently to assess all your risks. The importance of consistency will be clear when you ‘score’ your risks. There are a few ways to do this (such as the ‘Monte Carlo analysis’, or the ‘expected monetary value’) with varying levels of complexity. We have found for many third sector projects, the simplest and easy to use method is to apply scaling of 1-5 for each category and then use the calculation below:
(proximity x probability) x impact = your risk score
This can help you then to identify your minor, moderate, major and severe risks. The point of this whole exercise is to be able to manage these risks. You need to know at what point risks need to be escalated. You need to know which risks need prioritising. You may also need to report on risks to funders. And critically, you need to now look at how you respond to these risks. You can now look at how you respond to severe and major risks. Actions you can take that may change their risks ratings, bringing them back into the ‘green’ zone.
Remember – assessing risks is not a one-off activity. You should aim to respond to risks, which may change their ratings. Even if nothing else changes, the proximity rating is changing regularly. You should perform risk reviews regularly. This is, after all, one of the core functions of a Project Manager. It’s what makes us so essential in managing projects – making sure they stay on track and dealing with risks and issues, so they can be successful. In our next article, we will look at risk responses.
If you would like to learn more about Managing Project Risks and Issues we have a full-day training session taking place shortly on Wednesday 19th July 2017 at the Loftspace, Birmingham. This workshop is suitable for anyone who is managing a project in a charity, community group or voluntary organisation and is one of a series of workshops by PM3 – Project Management for the Third Sector, designed specifically for people managing projects in the Third Sector.
Nikki-Dee Haddleton is Director of PM3 – Project Management for the Third Sector. Incorporating feedback from Third Sector organisations and Project Management professionals they have designed a framework specifically for Project Managers in the Third Sector. PM3 – Project Management for the Third Sector delivers high quality, affordable Project Management consultancy and freelance services, training, support and more.