Risks are inevitable. How to manage them…
Every project manager desires to have successful project implementation. However, this has proven to be an impossibility. For some unknown reasons, well planned projects can go wrong and due to situations outside the control of the project manager. The possibility of something bad happening at some time in the course of implementing a project is called a risk. Example of a risk might be that an organization is unable to resource the project fully as required. For instance, road closures cause traffic re-routing increasing journey time to office.
It is important to learn how to manage risks since they are inevitable. Risks management in projects/programs is achieved in three simple steps including:
- Risk Identification
- Risk Assessment
- Risk Response
A risk is any event which could take place during project execution that will prevent the project from producing its deliverable on time. There are various possible risk types including:
- Environmental – These risks relate to climatic conditions such as rainfall, drought, desertification. Depending on the nature of the project, natural disasters such as flooding can become very serious issues to consider.
- Human – These are risks that originate from human activity or inactivity. Examples include labor strikes, beneficiaries unwilling to try new techniques or key project staff leaving the organisation.
- Technological – These include such risks that emanate from failures of technology due to its inadequacy to produce needed results. This may not necessarily be because the piece of technology is inadequate in itself, but because of the presence of other predisposing factors that limit its performance. Some examples include power outages, computer failure and car breakdown.
- Materials – This is the inability to get key parts, poor quality materials/parts required to complete project activities.
- Economic – These are risks relating to the local or global economy. This mainly manifests in the failure to spend allocated resources effectively due to fluctuating market values. Examples include: crop prices being unstable and increased fuel prices.
- Political – Political risks are some of the most important risks to take note of. They are able to frustrate projects and programs totally. An instance is a group advocating for program that promotes abortion in a country where there are laws criminalizing it. Members of the group stand a chance to be arrested by law enforcement agents. Projects that align with government policies and legislation are more likely to succeed than those trying to change them.
Risks versus Assumptions
Risk identification is a very important activity and can be helpful in assessing the various project activities to ascertain what kinds of risk may occur. It is also important to recognize the project assumptions. Assumptions are the necessary conditions to achieve your impact. For example; the assumption in conducting a sensitization campaign in a particular community is that community members will show up. The risk is the opposite of assumption. Assumptions are often in the form of availability of funds/resources, willingness of people to participate/support, access to technology or efficacy of methods.
A key point to note when identifying risks is to keep it realistic and probable. There is no need for unnecessary exaggerations. For instance, identifying sudden incessant thunderclaps as a risk in conducting a sensitization campaign is highly unrealistic. Such exaggerations should not be made. The goal of risk identification is to develop a list of probable risks, as the foundation for our Assessment and Response
The process of assessing risks gives the project planners and potential donors a clear understanding of what the likely effect of each risk is. There are two main variables to be considered in assessing any risk:
- Probability (likelihood)
- Impact (Consequence)
Probability refers to the chances that an event will occur. For each risk event, we need to specify the Probability of it occurring. This is conducted by grading them using the following categories:
- Rare – event will occur in exceptional circumstances
- Very Low – event not expected
- Low – event could occur
- Medium – event will probably occur in most circumstances
- High – event is expected/sure to occur
For the purpose of writing proposals, only three main categories are utilised: Low / Medium / High. This is because it is more beneficial to spend time and resources in analysing risks that are really going to occur against those that are possible (that is; could happen), but improbable (that is: unlikely to happen).
For each risk, we need to specify the consequence (Impact) of it occurring using the categories: Low / Moderate/ Major. The classification of risk impact implies the following:
- Negligible – Insignificant impact
- Low/Minor – Small impact
- Moderate – Some impact
- Major – Significant impact
- Catastrophic – Disastrous impact
Like in categorizing probability, it is best to be concerned solely with the most probable ones. Once the impact and probability of each risk is determined. The next step is to usually plot the risks on a grid similar to the one below.
This exercise is important because it shows what the actual risk is, that is, a product of the probability and impact of an event. Where a risk falls determines its severity and the overall impact the risk will have on the project. If a risk has high probability and high impact, it is best to remove totally the activities related to the risk. If such activities cannot be removed or modified to reduce the impact of the risk, the project should be abandoned. Such risks that have high impact and probability are known as killer risks. They are a basis of refusing donor funding in a project. Hence, this activity must be performed with great care.
When a risk has been assessed, then appropriate commensurate responses must be laid out to ensure that the original objectives of the project are achieved. There are four simple ways to handle risks should they occur. They are as follows: avoidance, mitigation, transfer and accept.
Take action to avoid the risk. Avoidance might mean modifying project activities or implementation strategies.
For instance, in a project that is interested in providing weekly training to rural women through health workers so as to improve maternal and child health status. If the identified risk is that health workers might be unwilling to visit the rural communities weekly due to poor access roads. To avoid the risk, the project trains Traditional Birth Attendants resident in the community and charge them with conducting the training. This way, the objective of the project is still achieved.
In this case, risks can not necessarily be avoided. The risks are necessary evils which must be confronted. Mitigation implies reducing the impact of the risk to its basest levels.
An example is a policy reform project in a country like Nigeria. Often times, impacting laws are recognized by policymakers though personal interests also play an important role in gaining their support. The project manager must find ethical ways to persuade the lawmakers to do the needful since there are no other alternatives. When unavoidable risks are identified, define actions to take when the risk occurs.
Depending on the nature of a risk, certain kinds of persons or professionals might be better suited to tackle the issues identified. The kinds of risks handled by transferring them are often unavoidable.
Example: Ebola Virus outbreak occurs in a certain community and health workers and other volunteers are expected to provide some level of assistance to the affected population. There is a risk that the volunteers might get infected and become ill or even die. The risk is great and cannot be avoided since not containing the infection will have more catastrophic effects. The project manager recruits only trained and experienced professionals to work in the region and also provides health and life insurance coverage for each of them. Thus the project team does not directly respond to any of the risks.
There are risks that are acceptable especially when achieving the desired results are of great importance and must never be compromised. A second scenario when risks can be accepted are when they have very low impact on the achieving the desired objectives. To accept a risk is to let it happen anyway.
Example 1: In a country where there are grave human rights abuses sanctioned by the government. A Human Rights Organization faces the risk of been blacklisted by the government if it exposes the depths of the Human Rights abuses. Efforts to negotiate with the government has proved abortive. Weighing the impact of not saying anything and alerting the international community; the organization makes public, damning materials on government support of human rights abuses. The organization is banned from operating within the country but then, the international community is aware and probing the activities of the indicted government.
Example 2: A welfare project is expected to provide a free meal for homeless people on a daily basis. The project largely succeeds over a period of 6 months before the economy goes into recession. The risk of not being unable to buy enough food must be accepted and improved funding sought.
Risk analysis is usually presented in a table like the one shown below:
While risks are inevitable, it is possible to manage them and still get good project results. Do you agree? Use the comments section and let me know if you have any questions. Was this article useful?
by : Michael Ukwuma