PRINCE2 Risk Management
So you want to know all about PRINCE2 risk management? o first, let’s take a look at what will be covered in the PRINCE2 Risk Theme.
- You will be able to answer (a) what is Risk, (b) what is at risk in the Project and (c) what is Risk Management. Also, you will learn the 3 steps to Risk Management which are Identify,
- Assess and Control and what Risk attitude is
- Learn about the relationship between the Risk Theme and the Management of Risk method from OGC.
- You will learn about the Risk Register, how it is used, and its contents.
- You will learn the 5 steps in the Risk Management Procedure, which are Identify, Assess, Plan, Implement and Communicate (I Appreciate PRINCE2 In Context).
- Identify: You will learn how to express Risk in the syntax of cause, threat and effect
Assess: Assessing risk is done in two steps. Estimate each risk one at a time and Evaluate all the risks together to get the Project Risk.
Plan: Plan how to respond to each risk – they can be threats or opportunities. The responses to threats are Avoid, Reduce, Fallback, Transfer, Accept and Share. The responses to opportunities are Exploit, Enhance, Share and Reject
Implement: Learn how to implement the responses to Risk. Communicate: You will learn what is meant by communicate.
PRINCE2 Risk Management in the real world
Most Project Managers don’t really get a chance to practice Risk Management. This is something that is covered very well in all the Project Management methods, but it seems to get forgotten about as soon as the project starts up. Even if Project Managers spend an appropriate amount of time on Risk Management, they may stop once they realize that nobody is interested in the Risk information, as there may be very little awareness of Risk Management in the organization.
Project Managers are not to blame. They first need a Risk Management approach to follow and the rest of the organization also has to be aware of the importance of Risk Management. If you are working in a program environment, there will most likely be a standard approach to Risk Management and hopefully you will have received training.
If you are not working in a program environment, then you should check if there are standard procedures available for Risk Management in the company or in use by other Project Managers.
The knowledge provided in this Risk Theme provides an excellent approach to Risk Management that you will be able to understand and use. I believe that the most important thing to understand in this theme is the structure of the Risk Register and how to use it to enter Risk information and how to track risks during the project.
A good tip to remember is to ask your Executive “How should risk be assessed, tracked and communicated during the project? This will give you a very good idea on Risk awareness for the project and perhaps for the organization.
PRINCE2 Risk Management – The Risk Theme
You will learn (1) the purpose of the information in the Risk Theme, (2) why there is risk in a project, (3) when Risk Management is done during the project, (4) who is responsible for Risk, and (5) who continually identifies, assesses and controls Risk in the project.
The purpose of the Risk Theme is to provide an approach to identify, assess and control uncertainty during a project and as a result, improve the ability of the project to succeed.
Why is there Risk in a project?
As projects are about doing something new, they are about change. Change introduces uncertainty and uncertainty is risk. The project needs to know how to identify risk, how to assess this risk, and how to control this risk, as it might affect the project objectives.
A good Risk Management procedure will support better decision-making concerning Risk, as there will be a better understanding of the risks, how these risks will affect the project, and the responses to these risks if they should occur.
When is PRINCE2 Risk Management carried out?
Risk Management is not just done at the start of the project but must be a continual activity during the full life of the project; it therefore is one of the main tasks for the Project Manager. It is the Executive that is responsible for Risk in a project, and they rely on the Project Manager to continually identify, assess and control risks throughout the project.
To summarize the purpose of the Risk Theme, it looks at identifying, assessing and controlling the uncertainty & improving the changes so that the Project has to succeed.
What is PRINCE2 Risk?
PRINCE2 has a specific definition for Risk, which is taken from the MOR method.
Risk is a set of events that, should they occur, will have an effect on achieving the project objectives.
Another PRINCE2 definition is:
Risk is an uncertain event that if it occurs, will have a positive or negative effect on a project objective.
In short, Risk is about uncertainty, this is easy enough to imagine. For example, in a project to customize a CRM application, you learn one of the risks is that the supplier team might not keep to their schedule and if this event happens, it would have an effect on one or more of the project objectives.
Risk can be seen as positive or negative. The cool way to say this is: Risk can be seen as a Threat or an Opportunity. Describing Risk as a positive – or should I say an opportunity – might be new for you, so I will go back to the example of the CRM application. The Risk that the Supplier might not deliver on time is a Threat, as it will have a negative impact on the Project.
Now, another Risk might be that we learn at the start of the Project that connection to the Internet might be updated during the Project and thus, it would increase the speed by a factor of five. This type of Risk is an opportunity, as it will have a positive impact on the project; the response time will be faster for most of the users.
What is at risk?
If I were to ask you the question, “What is at risk in the project?,” you might say that the project was at risk, or perhaps User satisfaction with using the product was at risk. PRINCE2 takes another view on this. It states the Project’s objectives are at risk. Remember, the Project will have objectives for the six performance targets, also referred to as the six Project Constraints, which are time, cost, quality, scope, benefits and risk.
What is PRINCE2 Risk Management?
Risk Management is about the steps you take in a systematic way that will enable you to identify risk, assess risk and control risk. This Risk Theme provides an approach to manage Risk in a project.
There are three steps to Risk Management which are Identification, Assessment and Control:
- Identification: How to identify and describe the risk.
- Assess the Risk: Ask what the likelihood of the risk is, its impact on objectives and when it is expected.
- Control the Risk: How best to respond to a risk; assign a risk owner, execute responses and monitoring.
Just remember that Risk Management is actively done throughout the project. A new risk can arise at any time in the project. The Project Manager should ask questions, such as “How will this affect the Business Case?” and “How does this risk affect any of the current risks already registered?”
The status of existing Risks can also change at any time.
The Management of Risk Method and Risk Context
PRINCE2 makes use of the other OGC method, which is Management of Risk (MOR). So PRINCE2 takes advantage of all these procedures and principles that have already been defined instead of trying to re-invent the wheel. The MOR method is a generic approach to Risk and has the following approach:
First, understand the project context;
- Involve Stakeholders, Users, Suppliers, and Teams, as team members are usually good at identifying Risk
- Establish an approach for the Project and document this approach
- Provide regular reports on Risk
- Define risk Roles and Responsibilities
Risk Context
Let me explain what I mean when I say: “Understand the project’s context.”
If someone asks you what a certain word means, you may ask in what context. Here you are asking what the context is from a Risk point of view.
- Example 1: If the project is a NASA space project and a device has to work for 10 years in orbit, this is a good example of a very low-risk tolerance project
- Example 2: We are developing a simple prototype for in-house use only and this product will have a annual of less than 4 months, so not everything has to work with this product. This is an example of a high-risk tolerance project.
Note: A project that has a high-risk tolerance is said to have a big-risk appetite.
When first considering Risk, the first question should be: What risk policies already exist in the company or in the program environment today that can be used so that there is no need to re-create them?” If a policy does exist, then this will save a lot of work and will provide the following information:
- The organization’s attitude towards Risk (also called Risk Appetite).
- Risk Tolerances
- Procedures for escalation
- Typical Roles and Responsibilities
- Example of a Risk Management Strategy document
Using a common approach to Risk Management also means that project stakeholders who are already familiar with this approach will be able to understand how Risk Management is done in your project.
You also need to take into account the Risk Attitude of your Project Board. Just imagine that you have three Risk seekers. It is good to have an approach to define and measure Risk and get their input.
PRINCE2 recommends that each project have its own Risk Management Strategy document. This document defines the project procedures for Risk Management, in terms of how Risk will be identified, assessed, controlled and communicated in the project.
This might seem like a big task, but if your project is part of a program, then most of the Risk Management Strategy will be already provided to you in a detailed template that you can update to suit the project you are working on.
Otherwise a Project Manager might use a Risk Management Strategy document from a previous project that they have done in the company and update it to suit the current project.
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