Project Risk Management: Pave to Success

We are surrounded by the era of Projects and Goals, Some of us are making goals for the present situation and some are worried about the future but projects are everywhere, we work daily in our lives to achieve something whether its money, fame, or power but for every desired outcome some inputs in the form of efforts, study, and manipulation are required which can be fulfilled by us or some person, company in our lives to complete the daily tasks.

A Project is simply a series of tasks, and inputs to reach a certain output or some goal as the finished product.

Project management is System based Controlling or managing the tasks and execution of different stages of the subject Project Plan. It’s based on five stages interconnected with each other. (Initiation, Planning, Execution, Monitoring, and Completion). Studying Project management is not new nor it is something that is not available on websites but today we will be discussing feasibility and Risk Management and how both can affect the project performance and how it makes the impact of project feasibility.

If we consider a Project-Based Business Company and its sales, it comes from the nature and efficiency to complete the available projects in the market, Also project technical integration and complexity make it more viable to deal with proper planning and execution. Advance Project management is to discuss each stage classification of any project before starting the project. There are considerable stages that need to be discussed in detail when discussing project management some of which are, procurement, planning, outsourcing, finance, and monitoring. Still, in this, we will discuss risk management and its effect on project feasibility.

The probability of suffering a loss is called “Risk”, whenever any company whether project-based sales or with other business intends to start a project for product development, they start with a feasibility plan and risk evaluation to get the exact calculation of capital investment, company’s reputation, expansion plan, post-installation results in form of volume sales, and profit on the sale (POS).

Discussing Risk, Risk isn’t bad, it’s an opportunity to access possible present or future situations and their outcomes. Risk management is to balance potential positive and negative consequences in associated possibilities. Risk Managers and Risk Analysts possess key positions in any organization, for each company according to its operations or projects risk may differ but the principle of impact will remain the same for example, in any construction company rework matters a lot, in some medical research company, safety evaluation of chemical formula remains critical, all the risks pointed out for data inputs and research moves around the safe evaluation of the product for human trials, in the bank and financial companies mark five years or ten years data benchmark as their critical area for risk evaluation, any process plant marks all the risks pointing to the continuity of their process operation. Thus when any firm plans to initiate a proposal or feasibility to achieve some end result it has to go for a detailed assessment for all costs of elements involved in their critical area according to the nature of the job, and all the possibilities that may occur as threats to their timeline.

Risk Analyst starts analyzing the possible risks for the subject project by dividing risk plans into three classifications,

 It is the marking and pointing of possible red flags which can damage the timelines, process, and project milestones. Risk can also be identified in form of possible results planned to come out by planned tasks in project timelines.

Internal: Risk revolves around the project variables, (Scheduling, Cost Optimization, Cashflows, Quality, and Timelines)

External: Factors involved outside the organization (Vendor, Outsourcing, Political, Regulations, Supply-Chain)

Unpredictable: Only 10% of risk falls under this category, (Natural Hazards, Riots, Economic Crises)

After the identification of possible breakdowns, threats, and hazards, they need to be evaluated on basis of information and calculation in form of numbers. Quantification of risk specifies them according to red, cautions, and green categories.

There are several methods and procedures to calculate the probable quantity of risk, it may result in form of financial numbers, money, working hours, production capacity units, and also its effect on allied project jobs.

All of the studying project classification and stages in detail is to develop a perfect ecosystem with coordination and mutual understanding to eliminate and counter the risk which is called Risk Monitoring System. There are several types of mitigations strategies to respond to risk,

Evasion: Reduces the calculated impact near to zero by eliminating them, as during assessment some risks are always termed as red flags which have to evade to prevent the project from major loss, this can be implemented by adopting ultra-defensive techniques, re-checking of tasks prerequisites before performing the job, re-checking of results, data before calling the work on the final stage.

Mitigation: As always some risks are unplanned and some have to be faced for proper action and mitigation plan with respect to impact analysis. Mitigation is the strategy to prepare contingency plans for scheduled risk which are always associated with important tasks as a bi-product and emergency incident plans which can only be initiated when risk occur and produce some possible well-accessed result i.e. medical injury. As a good project team, the company will always execute more contingency plans rather than emergency plans and a bad project company will always see busy handling emergencies by skipping the pre-planned risks calculations.

Acceptance: Risk has always been an opportunity and its result sometimes pointed out the new expansion plans, future challenges, scope or direction of future research work, and possible current outcomes which helps a person to calculate the possibility of suffering loss, because whenever in life anyone wants some movement, working on plans, planning of some new project risk always comes in and it needs to be assessed.

Deflection: Deflection means to divert the risk and its possibilities to be assessed, possessed, and challenged by a third party. This third party may outsource a vendor for any major, or minor job, a supply chain vendor or broker to deal with the market for possible inflation and economic risks, or maybe a good insurance company that has a business based on handling the risk and trying to make money from it.

 A good project company has always evasion plans rather than mitigation plans, deflection can be a good option but it always comes with a hefty premium price which itself may be marked as a possible risk in the project finance department which is struggling to counter cost optimization. 

Whatever it is, Risk needs to be monitored continuously during the project by gaging the risk symptoms or watching for risks that happened or are about to occur, by assuring contingency plans, one of the most important prospects needs to be discussed in daily, weekly project meetings are a risk with respect to different stages and timelines. The intensity of identified risks also needs to be monitored on a continuous basis for falling critical, and non-critical zones. Whenever a risk happens, it should be recorded in the project log which describes the risk, circumstances of its occurrence, the response taken, its degree of success of response, the cost of the event, and how it can be handled more efficiently in the future.

To discuss how risk affects your feasibility and growth in business we can use questioner method to access potential threats to a company and its business which not challenges its project feasibilities but also business ways.

• Have alternative ways been explored?
• What are the chances of risk in implementing new ways?
• What are the key performance indicators to know how we are doing?
• Is our HR exploring new potential teams?
• All contracts that have been awarded or won are cost-effective and fair for our reputation?
• What are the necessary changes that can be implemented with immediate effect?
• What is the percentage of our last five years’ targets? (Revenue, Overheads)
• Do we have the log or study of our last 05 years’ revenue trends?
• What significant projects have affected cost and cashflows?
• Is our clientele and project securing rate increasing or decreasing?
• Do we are following our audit findings?
• What are our performance monitoring tools?
• What is the relationship between upper and lower management and project assessability?
• How is our IT support and are we good at bookkeeping, and warehouse management?
• What are our financial targets?
• What is our allocated R&D budget and who it can be monitored?

Concluding Risk and its Effects, a company can possess different types of risks which can occur from its daily production units, and planning of expansion projects, to its business growth over the years but the factors and principles could remain the same, poor risk identification without proper knowledge, improper risk evaluation by using only general techniques not different methods with respect to nature and stage of risks involved, general risk identification by marking 10s or 20s risks in all over project rather than 100s of risk which can cover all the minor and major situations. Risk evaluation, identification without involving external factors i.e. political, regulations, marketplace, market competition, consumer audience, and cultural. One of the last factors that need to be set, regulate, and discussed continuously is the tolerance level of evaluated subject risk, tolerance level is very important in summarizing the decision for any event and its timeline, without setting a proper tolerance level a risk response cannot be completed.