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The Art of Risk Management
Risk management is a key discipline of project management that needs no introduction. There are well-defined risk management frameworks that help in identifying, analyzing, planning, and controlling risks. Project management experts recommend acceptance, avoidance, or mitigation as a strategy to manage risks. Risk quantification is done by determining the probability and impact of risks. Over a period of time, there is organizational learning that leads to enterprise frameworks being institutionalized to track and manage risks. Based on our experience, while a formal risk management framework is critical, there is an equally important experiential and skillful aspect that is often overlooked. As someone once said, “Risk management is much more than managing a risk register.”

In this article, we discuss risk management as an art and what should project managers do to enhance these skills. These suggestions serve as directional guides (or indicators), the intensity and success depends on the implementation skilfulness that a project manager brings in.

1. Be aware of the environment and understand the broader picture

At the core is the project environment (scope, mandate, deliverables etc.) and when you start moving outwards in a concentric fashion, the team comes next, followed by the client, then the client’s industry, and probably other macro social and economic factors. The dynamism in these environments could lead to unanticipated situations and complexities. Awareness of the larger environment and continuous monitoring helps the project manager to deal with such situations in an assured way. Being solution-oriented rather than focusing on problems helps the manager to deal with these risks in an effective manner.

2. Extend your risk identification sources

The complexity and multi-disciplinary nature of projects demand a more accurate, comprehensive, and real-time risk identification mechanism. The impact of incorrect and insufficient risks is significant and could have a cascading effect across the entire lifecycle. To address these issues, managers need to groom and enable their teams to watch out for project related risks. Regular interaction with the team on risk management, and encouraging innovation and creativity helps improve coverage, and thereby, better management.

3. Consider intangibles such as brand damage, revenue risk etc.

Projects are defined to support core business to have an impact on the revenue stream, operational efficiency, customer satisfaction, and increased differentiation. Understanding these core objectives is critical to trace back risks that have an impact on these parameters. However, there are intangible factors such as brand damage, customer base impact, and market perception that could have a much higher impact. A typical risk management framework ignores these aspects. Project managers must develop this capability to evaluate these factors, understand the business environment to estimate these unquantifiable parameters, and consider them while doing risk planning.

4. Use your gut feel

Given the multitude of aspects that can have an impact on a project, assessing the impact of risks and/or developing a response strategy is quite challenging. Being tuned into the environment at all times coupled with experience is essential to develop an instinct to respond to situations. Managers have to use these instincts regularly and trust the sub-conscious feedback cycle to improve the efficacy of their decision-making. Managers need to use their judgment and gut feel on when to use frameworks vs. when to trust their instincts. An environment that allows people to make mistakes and learn from them is critical to developing these skills.

As a field, risk management will continue to advance in terms of sophisticated models, simulation, and maybe even social or community based risk management. There is no doubt that these techniques are important and play a significant role in project execution. Our strong emphasis is for managers to develop the art of managing risks, besides learning about formal methodologies and techniques. Successful project managers in the future will rely on well-developed formal mechanisms and would have to continue developing their instincts to create an environment where risk management is a continuous process.

(Mr. Venkateswaran Vinod is an industry principal with the engineering consulting practice at Infosys who advises global enterprises on their ICT technology adoption. He has over 16 years of technical, consulting, product management, and delivery experience across automotive, banking, and retail industries.)
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