When working through the risk management life cycle, what’s the main goal when evaluating a risk?

A risk management plan can never be perfect. However, the degree of its success depends upon risk analysis, management policies, planning and activities. A well-defined management plan can be successful only if risks are properly accessed. And if not, the main objective of risk management plan itself is defeated. Critical evaluation of a risk management plan at every stage is very necessary especially at an early stage. It will allow companies to discover the flaws before it gets into the action. Once you’re through the process, you can address the issues and then introduce it.

The below mentioned steps can help in analyzing and evaluating a risk management plan:

• Problem Analysis: Keep a note of all the events and activities of a risk management plan. Check out the problems arising from their implementation and assess if they have a serious impact on the whole process. Make a note of those that have serious implications.
• Match the Outcomes of a Risk Management Plans with its Objectives: Ends justify means. Check if the possible outcomes of a risk management plan are in tandem with its pre-defined objectives. It plays a vital role in analyzing if the plan in action is perfect. If it produces desired results, it does not need to be changed. But if it fails to produce what is required can be a really serious issue. After all, an organization deploys its resources including time, money and human capital and above all, the main aim of the organization is also defeated.
• Evaluate If All the Activities in the Plan are Effective: It requires a thorough investigation of each activity of a risk management plan. Checking out the efficiency of all the activities and discovering the flaws in their implementation allow you to analyze the whole plan systematically.
• Evaluate the Business Environment: A thorough study and critical evaluation of business environment where a risk management plan is to be implemented is essential. Take time to assess, analyze and decide what exactly is required.
• Make Possible Changes in Faulty Activities: After evaluating the effectiveness and efficiency of all the activities, try to make possible changes in the action plan to get desired results. It may be very time consuming but is necessary for successful implementation of your risk management plan.
• Review the Changed Activities: After making changes in already existing activities and events of a risk management plan, go for a final review. Try to note down the possible outcomes of the changed activity and match them with the main objectives of the risk management plan. Go ahead in case they are in line with them.

Evaluating a risk management plan sometimes can be very frustrating. It is definitely a time consuming process and also requires more of human efforts. Therefore, it is always better to analyze and evaluate a plan at every stage otherwise it will result in wastage of time, finances and efforts. In order to keep a check on it, specialized teams of risk managers can be appointed. The whole event can be outsourced to a risk management firm. The professionals at the firm can help you design, develop, implement and evaluate a risk management plan for your company.

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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.

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With any new project comes new risks lying in wait. While your organization can’t entirely avoid risk, you can anticipate and mitigate risks through an established risk management process. Follow these risk management steps to streamline your team for success, making the team more agile and responsive when risks do arise.

What is the risk management process?

It's simply that: an ongoing process of identifying, treating, and then managing risks. Taking the time to set up and implement a risk management process is like setting up a fire alarm––you hope it never goes off, but you’re willing to deal with the minor inconvenience upfront in exchange for protection down the road. 

Identifying and tracking risks that might arise in a project offers significant benefits, including:

• More efficient resource planning by making previously unforeseen costs visible
• Better tracking of project costs and more accurate estimates of return on investment
• Increased awareness of legal requirements
• Better prevention of physical injuries and illnesses
• Flexibility, rather than panic, when changes or challenges do arise

Risk Management Steps

Follow these risk management steps to improve your risk management process.

1. Identify the risk

Anticipating possible pitfalls of a project doesn't have to feel like gloom and doom for your organization. Quite the opposite. Identifying risks is a positive experience that your whole team can take part in and learn from.

Leverage the collective knowledge and experience of your entire team. Ask everyone to identify risks they've either experienced before or may have additional insight about. This process fosters communication and encourages cross-functional learning.

Use a risk breakdown structure to list out potential risks in a project and organize them according to level of detail, with the most high-level risks at the top and more granular risks at the bottom. This visual will help you and your team anticipate where risks might emerge when creating tasks for a project.

Once you and your team have compiled possible issues, create a project risk log for clear, concise tracking and monitoring of risks throughout a project.

A project risk log, also referred to as a project risk register, is an integral part of any effective risk management process. As an ongoing database of each project’s potential risks, it not only helps you manage current risks but serves as a reference point on past projects as well. By outlining your risk register with the proper data points, you and your team can quickly and correctly identify and assess possible threats to any project.

2. Analyze the risk

Once your team identifies possible problems, it's time to dig a little deeper. How likely are these risks to occur? And if they do occur, what will the ramifications be?

During this step, your team will estimate the probability and fallout of each risk to decide where to focus first. Factors such as potential financial loss to the organization, time lost, and severity of impact all play a part in accurately analyzing each risk. By putting each risk under the microscope, you’ll also uncover any common issues across a project and further refine the risk management process for future projects.

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3. Prioritize the risk

Now prioritization begins. Rank each risk by factoring in both its likelihood of happening and its potential effect on the project.

This step gives you a holistic view of the project at hand and pinpoints where the team's focus should lie. Most importantly, it’ll help you identify workable solutions for each risk. This way, the project itself is not interrupted or delayed in significant ways during the treatment stage.

4. Treat the risk

Once the worst risks come to light, dispatch your treatment plan. While you can’t anticipate every risk, the previous steps of your risk management process should have you set up for success. Starting with the highest priority risk first, task your team with either solving or at least mitigating the risk so that it’s no longer a threat to the project.

Effectively treating and mitigating the risk also means using your team's resources efficiently without derailing the project in the meantime. As time goes on and you build a larger database of past projects and their risk logs, you can anticipate possible risks for a more proactive rather than reactive approach for more effective treatment.

5. Monitor the risk

Clear communication among your team and stakeholders is essential when it comes to ongoing monitoring of potential threats. And while it may feel like you're herding cats sometimes, with your risk management process and its corresponding project risk register in place, keeping tabs on those moving targets becomes anything but risky business.

Try one of the templates above to start your risk management process.

Be better prepared and implement a complete risk management strategy.

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