Three Keys to a Successful Risk Management Plan

Three Keys to a Successful Risk Management Plan

Uncertainty and risk are two terms that are often thought to mean the same thing but are not. A project’s uncertainties may relate to fluctuations in the price of construction materials, alterations of resource estimates, changes in weather conditions during construction, or shifts in public and investor perceptions. A project team has a level of confidence in each of these variables, but designs, schedules, and budgets only reflect the best-known scenarios. 

Risks are the potential losses or negative outcomes due to uncertainty. Greater uncertainties directly relate to greater risks. Project risks can affect all three sides of the project triangle: scope, schedule, and budget. As such, uncertain factors should be identified and the resulting expected, best, and worst-case risk scenarios quantified. 

For example, winter construction brings with it uncertain weather. In Wyoming, cold and snowy winters are anticipated, but what if winter lasts longer than usual or is warmer and wetter than anticipated? The risks then are that the project may be delayed or more staff time is required to get the project back on schedule, which can result in increased project costs. Risks associated with construction schedule delays can be mitigated by identifying the critical path items that can be performed by alternative means or by building float into the schedule to accommodate unforeseen delays.

Project teams need to use the best available data to validate assumptions, reduce uncertainty, target risk factors that have the highest probability of occurring and greatest severity of impact on a project, and determine the appropriate mechanism for dealing with each. The team can then choose to accept, avoid, transfer, or mitigate these risks.

In all cases, a Risk Management Plan (RMP) must be established that describes quantified risks and identifies associated actions and responsible parties for managing mitigation if risks do arise.

The keys to a successful implementation

 It is relatively easy to understand the principals of identifying risks and preparing a management plan to mitigate these challenges, but it can be difficult, at times, to implement these tools during a project. Here are three keys to implementing a successful RMP:

  1. The project stakeholders (e.g. engineering firm, client, and contractor) need to have complete buy-in to the process. Each needs to understand their role in the management plan and must be fully committed to following through on their assigned tasks.
  2. The project stakeholders must identify a single RMP champion (often the Project Manager) who is responsible for full plan implementation. The champion must be given the authority to implement the assigned risk mitigation plan and delegate tasks to team members.
  3. Understand that the Risk Management Plan is a living document that must be updated as a project progresses. Stakeholders should meet regularly to reevaluate the criticality of each risk and determine how mitigation strategies have been working. The frequency of the RMP progress meetings is dependent on the type and duration of the project.

Don’t discount the likelihood of risk

Risks are often ignored, but it is imprudent to pretend as if a project will not be affected by challenges. Overlooking or disregarding risks can lead to schedule and budget overruns, unsafe conditions, or some level of failure. By creating a feasible plan to manage known risks and engaging all stakeholders through reasonable leadership, pitfalls are often avoided and the probability for success is greatly increased. 

 

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Project Manager
TREC, a Woodard & Curran company

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