Outlining the Strategic Risk Plan

Question: Discuss about the Outlining the Strategic Risk Plan. Answer: Introduction The purpose of this report is to develop an effective risk plan that would include steps for implementing the option selected. The report would also discuss about how the success of the risk response efforts will be analysed. Further, the report has discussed various triggers that may give rise to new risks and facilitate implementation of agreed upon responses to the exiting risks and also the perceptions and interactions of stakeholders. In this report, therefore, outline of a risk plan that includes strategies for monitoring and controlling risks and optimizing opportunities strategically has been discussed. Risk management plan The purpose of a risk management plan is to prepare the organization for the event of risk during the life cycle of the project. A risk can be define as incident or condition, if occurs, can have a positive or negative impact on the projects objectives and success. Therefore, risk management can be seen as a process of identifying, accessing, mitigating, monitoring and reporting risks (Pritchard and PMP 2014). Risk management plan outline Risk identification: the first step in the development of risk management plan. The project manager, project team, and various appropriate stakeholders undertake risk identification jointly. It involves evaluation of environmental factors, scope of the project being undertaken and organizational culture to identify risks. At this stage, detailed attention is paid to the project outcomes, assumptions, limitations, cost forecasts, resource plan and other key project documents (Peixoto et al. 2014). One of the best ways of identifying all the risks associated with a project is to categorize risks in different groups such as corporate risks, business risks, project risk and infrastructural risks (Booth 2015). This can be documented effectively with the help of risk register. Further, for small projects, project managers can act as a risk manager but, for large projects, it can be advantageous to have outside risk facilitators to conduct a number of brainstorming sessions with appropriate stakeholders to access various types of risks (Burke 2013). Risk log: The following table represents the risks identified during the development of risk management process and during the project life cycle (Ashuri et al. 2015). No. Date (identified) Risk description Owner Probability Impact Risk reduction actions 1. 1/05/2016 Significant change in project requirements Mr. XYZ Low High Ensure that project requirement is previously agreed on and finalized before specification 2. 07/05/2016 Loss of key project employee Mr. ABC Low High Utilization of reserve employee to proceed with the task until the recruitment of new employees 3. 12/05/2016 Change in the priorities of top management Mr. PQR Medium High Proper communication with the top management about the project proceedings and the importance of project for the organization 4. 22/05/2016 Lack of training among the staff to effectively complete the tasks Mr. JKL High High Make sure that the employees are hired and selected for the project based on the objectives of the project and individual competency of the staff. In addition, appropriate training should be given from the beginning of the project. 5. 31/05/2016 Probability of increase in the input costs Mr. MLK Medium High Ensure tight cost control and provision for contingency funds to meet the additional expenses on the input procurements. (Source: as created by author) Analysis and evaluation: Once the risks have been identified, it is important to analyse these risks in order to determine how they might influence the success of the project. Generally, the impact of the risks on the project is seen in the form of one or a combination of these consequences listed below; Project benefits to the may get reduced or delayed The quality of project output may get diluted The time frame of the project may get extended The costs involved in the completion of the project may get increased Once the risks and its impact on the success of the project is identified and analysed, it is important to determine the likelihood of that risk and the seriousness of that risk on the project in order to devise strategies to mitigate the risks. Further, it is also important to determine the impact of identified risk on the project in terms of four consequences listed above (Kendrick 2015). Risk mitigation: Risk mitigation is the most crucial part of risk management plan. This aims at devising strategies to reduce the negative impact of risk on the project. Risk mitigation involves actions to reduce the probability of occurrence of risk events (preventive action) and actions to minimize the impact of risk that still occurs (contingency action). Since, there are different categories of risks that have different impact on the project success, different strategies are adopted while devising strategies to mitigate risks (Caron 2013). Risk monitoring: Risk management is a repetitive process and the project managers or risk facilitators are continuously required to evaluate the external and internal factors affecting the project and identify various risks that may come up in the life cycle of the project. Further, through the strategies implemented to mitigate the risks, it becomes important to re-evaluate and re-categorize the risk in terms of likelihood and seriousness to the project (Moran 2014). Tools and techniques for monitoring and controlling risks in project management Risk monitoring and control is the process of identifying risk and risk triggers, monitoring residual risks and identifying new risks that may arise in the process of project execution. It also aims at execution of risk management plans and evaluating its effectiveness in reducing risks. Various tools and techniques that can be used by project management are discussed as Project risk response audits: in this, risk auditors examine and document the effectiveness of risk response system devised by the project manager to avoid, transfer and mitigate risk occurrence (Moran 2014). Periodic project risk reviews: in order to identify and manage new risks periodic reviews are scheduled and project risks are analysed. Risk ratings and prioritization may change over the life cycle of project. Therefore, periodic risk reviews helps in keeping the risk profile updated. Earned value analysis: this method is used to measure overall performance of the project against a baseline plan. This method helps in analysing any project deviations in terms of project costs and schedule targets. Variance and trend analysis: variance analysis is a method of comparing actual project results to expected results. The most common variances that are compared are project cost and project schedule. On the other hand, trend analysis involves evaluating project results over time to access whether the performance is improving or deteriorating. Technical performance measurement: This method helps in comparing technical accomplishments during project execution to the project plans schedule of technical achievement. If the project presents any deviation from achieving technical achievement at planned milestone, it can imply project risk in achieving its objective. Additional risk response planning: If a new risk emerges during project life that has not been identified in the risk development plan, the planed response may not be adequate. Therefore, it becomes necessary to perform additional risk response planning (Moran 2014). Frequency of risk assessment Risk management is an ongoing process and the project managers need to modify contingency plans according to the risk identified in the process of execution. As the project matures, new risks may arise and previously identified risks may disappear, furthermore, risk rating and prioritization changes over time and it becomes crucial for the project manager to periodically undertake risk evaluation and develop suitable strategies to avoid, transfer or mitigate risk occurrences. Therefore, during the project execution, risk meeting must be held to update the status of risks in the risk register, and add new risks. In order to achieve this, project managers need to establish frequent reminder to identify and access risk for the project life cycle. Reminders can be set on the basis of a fixed time period or on the accomplishment of milestone event in the project execution (Kendrick 2015). Role of stakeholders in development of risk registers In addition, while planning risk management approach for the project, stakeholders should also be included in the process. Stakeholders such as suppliers, government, shareholders, employees and customers must be included while developing risk registers. Stakeholders have varied level of expertise on matters concerning the project execution and can provide insight about the risks that might have been ignored in the risk identification process. Further, stakeholders also helps in identification of risk triggers and can be made owned of the risk for better execution of project and achieving organizational objectives (Peixoto et al. 2014). Conclusion From the above discussion, it can be concluded that risk management plan is one of the crucial tools in the hands of the management to identify and access risk associated with a project and enables the project manager or the risk facilitator. Risk management is an iterative process and require constant reassessment and upgrading so that the risk plan can reflect current position of the project. Further, it is important to involve appropriate key stakeholders of the project in order to have a greater understanding of the projects and assigning individual responsibilities to the stakeholders for risk mitigation and monitoring purposes. The risk management plan outlined above would also enable the management and various key stakeholders to review the risk of the project and determine the firms risk profile based on mutual agreements. 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Pritchard, C.L. and PMP, P.R., 2014.Risk management: concepts and guidance. CRC Press.