3.6 Project Risk by Phases
Another effective way to manage risks is to consider the project lifecycle. Risk management techniques can vary by project phase. In the simplest of terms, the initiation phase usually involves simply assessing overall project risk by identifying the key risks. During the planning phase, the team is able to identify, assess, and respond to many more risks. During the implementation phase, previously identified response strategies require modification if they have been deemed ineffective or significant new risks emerge. During the closure stage, contractual arrangements related to risk management are terminated and risk management documentation is updated.
Initiating Phase: Risk is associated with the unknown. More things are unknown at the beginning of a project than at any other phase. When overall project risk is considered in the initiation phase, it is weighed against the potential benefit of the project’s success in order to decide if the project should be chosen.
Planning Phase: Once the project is approved and it moves into the planning phase, additional risks are identified. Moreover, the list of initial risks identified during the initiation phase is considered in greater detail.
Implementing, Monitoring and Controlling Phases: As more information becomes available to the team and tasks are performed without loss, the overall project risk typically reduces. As the project progresses, the risk management plan must be updated with new information and risks related to the completed tasks must be checked off.
As the project’s progress is monitored, the need to make changes may arise. Sometimes, these changes occur as a result of risk management strategies that have been pursued in response to newly identified risks. In some situations, the project timeline may need to be extended or the project budget may need to be increased (or the timeline/budget may need to be reduced if an opportunity has been discovered!).
Closing Phase: During the closing phase, agreements for risk-sharing and risk transfer must be concluded and the risk management plan must be examined to ensure all the risk events have been effectively managed. If a risk register was used to track risks and their respective response strategies, a final update should be composed in order to ensure the register can be shared with and easily understood by future project teams in order to improve their likelihood of success. Similarly, identifying how much of the contingency funds were required is an important project closure step. This allows future teams to understand how much funds they may have to set aside to manage similar risks on their projects. Lastly, if a Monte Carlo simulation was done, the predicted result can be compared to the realized result.
Risk is not allocated evenly over the life of the project. On projects with a high degree of new technology, the majority of the risks may be in the early phases of the project. On projects with a large equipment budget, the majority of the risks may be during the procurement of the equipment. On global projects with a large amount of political risk, the majority of the risks may be toward the implementation and closure of the project.